Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism (SRM)
Commission adopts detailed rules on contributions of banks to resolution funds
Delegated Act - BRRD
The Bank Recovery and Resolution Directive 2014/59/EU (BRRD) published in the Official Journal on 12 June 2014 sets out new resolution rules for all EU banks. These rules include a national, prefunded resolution fund that each Member State has to establish and build up so it reaches a level of at least 1% of covered deposits within 10 years (according to the data provided by the Member States, as of end 2012 covered deposits in the European Union amounted to nearly EUR 7 000 billion).
In the context of BRRD, all institutions (credit institutions and investment firms) authorised in European Member States, including branches of third country financial institutions, have to contribute to the resolution financing arrangements. The Delegated Act determines how much individual credit institutions will have to pay each year to their respective resolution funds according to the bank's size and risk profile.
The risk pillars and risk indicators used in the methodology for the calculation of contributions are:
1. risk exposure
2. stability and variety of sources of funding
3. importance of an institution to the stability of the financial system or economy
4. additional risk indicators to be determined by the resolution authority
The Delegated Act should be applicable by 1 January 2015.
Draft proposal for a Council implementing act - SRM
The Single Resolution Mechanism Regulation establishes the Single Resolution Fund in the Banking Union. It will reach the target level of EUR 55 billion over 8 years (the basis being 1% of the covered deposits in the financial institutions of the Banking Union). Once this target level is reached, in principle, the banks will have to contribute only if the resources of the resolution funds are used up.
The methodology developed in the Delegated Act mentioned above also applies to the calculation of the contributions in the euro area.