EBA publishes technical standards and guidelines on simplified obligations
The EBA published its final Guidelines and final draft Implementing Technical Standards (ITS) relating to the eligibility of institutions for simplified obligations in the context of recovery planning, resolution planning and resolvability assessments under the Bank Recovery and Resolution Directive (BRRD). The EBA also issued final draft ITS on the procedures, forms and templates for submitting information on resolution plans under the BRRD. The work of the EBA aims at promoting a common EU framework for the application of simplified obligations, in line with the principle of proportionality, and to facilitate cooperation among EU authorities.
The guidelines clarify that globally systemically important institutions (G-SII) and other systemically important institutions (O-SII) should not be subject to simplified obligations as it is clear that the failure and subsequent winding up under normal insolvency proceedings of such institutions would be likely to have a significant negative effect on financial markets, on other institutions, on funding conditions or on the wider economy.
The guidelines include a number of mandatory indicators which should be used by the authorities when assessing institutions against the criteria listed of the Directive. Each mandatory indicator has been assigned to a specific criterion in order to promote a uniform approach to the assessment of institutions against the criteria.
A list of optional indicators is also set out in the guidelines. The authorities may take into account one or more of the optional indicators, in addition to the mandatory indicators, when assessing institutions against the criteria. In selecting and applying the optional indicators, the authorities should choose those indicators relevant to the institution, or category of institution (e.g. credit institution or investment firm), in question. The list of optional indicators includes all of the mandatory indicators in order that the authorities may use any indicator in relation to criteria other than the criterion to which it has been assigned as a mandatory indicator (e.g. the indicators ‘total deposits’ and ‘total covered deposits’ could be considered, for example, in relation to the ‘nature of business’ criterion as well as being required to be considered in relation to the ‘scope and complexity of activities’ criterion).