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Resolution Planning (nearly) resolved

The EBA has released the draft RTS on the content of resolution plans and resolvability assessment and a draft set of guidelines on measures to reduce impediments to resolution. Articles 10, 12 and 15 BRRD (Directive 2014/59/EU) mandate the EBA to draft RTS that impose common European standards, facilitating harmonisation between resolution authorities.  The draft RTS typically emphasises its respect for proportionality, recognising that resolution planning is an essentially bespoke process; a plan’s complexity will be dictated by the nature of the organisation, the simpler of which may be liquidated rather than resolved. National authorities may apply simplified obligations when the conditions of Art. 4 BRRD are satisfied.


Content of Resolution Plans (RP)

  • A general requirement for national authorities to include any information necessary to deliver their chosen resolution strategy.
  • A summary of the RP including a description of the entity in resolution.
  • A description of the preferred resolution strategy, including decision-making and information-sharing arrangements. Variant strategies may be included if the preferred option is unfeasible.
  • Arrangements to ensure the availability of information, required for both preparatory steps such as valuation and to execute the RP.
  • Arrangement to ensure operational continuity during the resolution process.
  • Arrangements for financing the resolution, including an assessment of financing sources in accordance with the BRRD.
  • Plans for communication with critical stakeholder groups
  • Results of the resolvability assessment. This should include a quantified report on any changes required to eligible liability minima.
  • Responses on the above from the entity undergoing the RP process.

Assessment of Resolvability

The process is intended to serve three purposes:

  • RP quality assurance via feasibility\credibility assessment
  • Annual assessments impose a maintenance and development schedule
  • The ex ante identification of impediments to the RP

The assessment is a four stage process:

  • An evaluation as to whether the liquidation of the entity is consistent with the public interest. Resolution can only be an option once liquidation under normal insolvency is considered unfeasible. The evaluation will take account of ability to support relevant deposit guarantee schemes and the likely impact on critical national or EU financial systems of the sudden cessation of the entity’s activities.
  • Selection of the preferred resolution strategy. Resolution authorities must decide whether to apply a single point of entry or multiple point of entry strategy, requiring an evaluation of the whole entity in terms of: asset\liability distribution, contractual arrangements, operational structure (centralised or decentralised), resolution tool enforceability in relevant 3rd countries, the need for supporting action by 3rd country authorities.
  • Feasibility. Assessment of impediments to resolvability is broken down into five fully detailed areas: structure and operations, financial resources, information, cross-border issues and legal issues
  • Credibility. Assessment of the likely impact of RP implementation on financial systems of Member States., with particular focus on: financial market functioning\confidence, market infrastructure, impact on other financial institutions eg. funding cost rise or contagion, the real economy and provision of financial services.

As a complement and extension to the above, the EBA have also published a draft set of Guidelines on specific measures to reduce\remove impediments to resolvability, and how they may be applied under Art. 17(5)  BRRD.  Measures are grouped under three broad headings: structural measures concerning the organisational, legal and business structure of an institution; financial measures relating to its assets, liabilities, and products; additional information requirements. The appropriate measure will depend upon the specific circumstances of the entity. Due reverence is again made to proportionality, authorities must document cost\benefit and impact estimates. The Guidelines reflect the distinction between multiple and single point of entry, while making clear that both may imply an imposed separation of legal entities or functions during and after resolution.


The two related consultation documents represent a comprehensive and well-balanced framework. Resolution planning is as inherently uncertain as the future, and is there fore inimical to the illusion of mathematically-modelled certainty. The plan contents and assessments are prescriptive enough to ensure consistency, while allowing a wide latitude of response. Emphasis is placed on the need to tailor the RP to individual entities, reflecting the FSB recommendations that a resolution strategy should mirror the organisational structure of the entity under question.  The costs to individual firms in the preparation and annual submission of the RP will, to a certain extent, have already been incurred in the development and maintenance of an effective risk management framework. However, RP is a plan for business very much not as usual, representing a significant extension of typical stress test measures and involving new authorities and tests; costs in both time and infrastructure will be far from negligible.


The comment period for both drafts closes on 9 October 2014.

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