FORUM
Impacts
* Preparation and prevention
* Early intervention
* Resolution
It introduces also a gradual and planned approach to the management of crisis through the preparation of a Bank Recovery
Plan and a Resolution Plan by the Authority.
Moreover, the Directive defines mechanism of the Single
Resolution Authority and tools to overcome crisis, such as the
creation of special vehicles to preserve or get out internal assets
(Bridge Bank or Bad Bank), in addition to the possibility of
reducing Bank shares and debts converting them into shares
(bail-in).
Single resolution mechaniism (srm)
SRM introduces the Resolution Authority and the Resolution
Fund. The Objective is to preserve EU financial stability and
avoid risk of contagious through the creation of centralized
resolution procedures to manage Banks in crisis. The Single
Authority, Single Resolution Board (SRB), is in charge of monitoring crisis and defining procedures for Banks in crisis with the
National Authorities (NRA) working together.
The logic of the regulation is that any resolution is first of all
taken in charge by the Bank in crisis with its shareholders and
Amount is corrected in accordance with the risk profile of the
Bank. The methodology assesses the following risk categories:
1. Risk exposure
2. Stability and diversification of funding
3. Importance of Bank to the stability of the financial system
4. Other risk indicators established by the resolution
For the first time Banks will calculate Own Funds and Infra
Group exposures in Local GAAP instead IFRS while Derivatives
Revaluation will be based on the Leverage Ratio Methodology.
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N°94
creditors, only secondarily by the Single Resolution Fund supporting
the Finance Resolution
Plan with the National
Authority.
Any Bank has to contribute to the Fund on a
yearly basis (based on
data of previous year)
and the contribution is
defined as:
(Total Liabilities - Own Funds - Covered Deposits +/- Derivative Adjustment - Infra Group liabilities (only EU Financial
Institution) - Institution's specific deduction) x Risk Factor
Indicators.
The Objective is to preserve
EU financial stability and
avoid risk of contagious
through the creation of
centralized resolution
procedures to manage Banks
in crisis.
-
The SRM along with the Single Supervisory Mechanism - SSM
and Deposit Guarantee Schemes - DGS are the three pillars on
which is based the European Banking Union.
The BRRD provides 3 distinct phases to manage crisis:
LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE
Recovery and Resolution Directive - BRRD, entered into force on 1 January 2016, represents a big change for European Banks especially for the impacts not yet estimated
on the capital of Banks. The Directive introduces the Single Resolution Mechanism -
SRM and the Bail-in, defining a new legal framework for the reorganization and resolution of European Banks.
/ AUG / SEP 2016
of Single Resolution
Mechanism and Bail-in
for European Banks
35
Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°94 - Juil/Août/Sept 2016