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Resilience of the EU financial sector in the global context - Workability of cross-border bank resolution
Coordination between EU home/ host authorities during the resolution planning stage
By Jaudoin Olivier - Resolution Director, Autorité de Contrôle Prudentiel et de Résolution (ACPR)
The financial crisis demonstrated that the systemic effects of banking failures were not limited to national boundaries and that States were not almighty in supporting distressed institutions. This global perspective was clearly spelled out in the FSB Key Attributes at the international level and in the BRRD at the European level.
Banking recovery and resolution is first a matter of preparedness where authorities must cooperate at international level in the case of cross-border groups. In the wake of the FSB crisis management groups, the BRRD created the resolution colleges in the same spirit of fora dedicated to the preparation and, if need be, implementation of resolution actions. Where the resolution of institutions which are part of a group is at stake, the group-level resolution authority shall closely coordinate with the resolution authorities of the subsidiaries. Similarly, for an institution not part of a group but with cross-border activities, the national resolution authorities of the jurisdictions in which any significant branches are located shall be consulted by the home resolution authority. Therefore, home and host authorities must share relevant information and interplay in order to take into consideration all components of the group or institution and make effective joint decisions.
This means it is only in exceptional scenarios where authorities cannot make a joint decision – e.g. on the content of the draft plan – that local resolution plans are possible. However, the likelihood of such a situation is low for it would mean the lack of a GLRA resolution plan or the failure of the European Banking Authority in reaching an agreement between home and host authorities through its mediation powers.
Home and host authorities must share relevant information and interplay in order to take into consideration all components of the group or institution and make effective joint decisions.
Lastly, the Single Resolution Mechanism (SRM) was designed to overcome home/host resolution issues within the Eurozone as the Single Resolution Board (SRB) is directly responsible for entities directly supervised by the European Central Bank and cross-border groups.
The implementation of BRRD and SRM should lead to consistent and reliable resolution plans. That said, given the recent nature of the framework, remaining disagreements cannot entirely disappear despite the solid ground it provides in favour of cross-border cooperation.