Key regulations: recovery and resolution
Key Attributes of Effective Resolution Regimes for Financial Institutions
Scope: Global | Regulator: FSB | Industry: Finance | Theme: Risks - Recovery and Resolution | Publication date: 25/04/2024
The Key Attributes (KA) set out twelve essential features of an effective resolution regime. These include a resolution authority with adequate authority, a range of resolution instruments (e.g. bail-in), and legally binding cross-border cooperation. The April 2024 revision includes additional guidance on financial resources and tools to support the orderly resolution of financial market infrastructures (FMIs) and their participants.
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Principles on Loss-Absorbing Capacity and Recapitalisation of G-SIBs in Resolution
Scope: Global | Regulator: FSB | Industry: Finance | Theme: Risks - Recovery and Resolution | Publication Date: 09/11/2015
These principles provide a framework to ensure that global systemically important banks (G-SIBs) have sufficient capacity to absorb losses and recapitalize in the event of resolution. The aim is to reduce the risk of financial instability and avoid the use of public funds for bailouts by setting minimum capital and absorbing debt requirements that banks must hold to cover losses during a crisis.
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Single Resolution Mechanism Regulation (SRMR)
Scope: EU | Regulator: European Parliament and Council | Industry: Finance | Theme: Risks - Recovery and Resolution | Publication date: 14/11/2024
This Regulation establishes a single resolution mechanism to deal effectively with the failure of banks and certain investment firms in the European Union, with the aim of safeguarding financial stability and minimizing the use of public funds. It creates the Single Resolution Board, which is responsible for coordinating action in the event of a banking crisis, and the Single Resolution Fund, which is financed by the financial institutions themselves, to support resolution measures. This ensures a consistent approach across the EU to avoid systemic risk.
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Bank Recovery and Resolution Regulation (BRRR)
Scope: EU | Regulator: European Parliament and Council | Industry: Finance | Theme: Risks - Recovery and Resolution | Publication date: 15/07/2024
Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishes uniform rules and procedures for the resolution of credit institutions and certain investment firms under the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF). This regulation aims to ensure an orderly resolution of banking crises, minimizing the impact on the economy and protecting taxpayers by avoiding bail-outs with public funds. The Single Resolution Board (SRB) is the central authority responsible for implementing these measures, working closely with the national resolution authorities of participating Member States.
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Bank Recovery and Resolution Directive (BRRD)
Scope: EU : Regulator | European Parliament and Council | Industry : Finance | Theme : Risks - Recovery and Resolution : Date of publication : 09/01/2024
This Directive lays down a common European Union framework for the recovery and resolution of credit institutions and investment firms. It aims to ensure that when a financial institution faces serious problems, mechanisms are in place to deal with them in an orderly manner without resorting to bail-outs with public funds. The Directive introduces measures such as the preparation of recovery and resolution plans, the establishment of resolution authorities, and the use of tools such as bail-in to absorb losses and protect overall financial stability.
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Minimum Requirement for Own Funds and Eligible Liabilities (MREL) Policy under the Banking Package
Scope: EU | Regulator: SRB | Industry: Finance | Theme: Risks - Recovery and Resolution | Date of publication: 20/05/2020
Policy to align MREL requirements with the new Banking Package (BRRD2/SRMR2/CRR2/CRDV) to ensure that banks maintain a minimum level of own funds and eligible liabilities to support effective resolution.
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Proposal for a Directive on the recovery and resolution of insurance and reinsurance undertakings (IRRD)
Scope: EU | Regulator: European Parliament and Council | Industry: Insurance | Theme: Recovery and resolution | Date of publication: 22/09/2021
The proposed Directive establishes a comprehensive framework for the recovery and resolution of insurance and reinsurance undertakings. This framework is designed to ensure that these companies can be resolved in an orderly manner without recourse to extraordinary public financial support, thereby protecting policyholders and maintaining financial stability. It introduces measures for preventive recovery planning, requiring insurance and reinsurance undertakings to draw up recovery plans describing the measures they would take to restore their financial position in the event of a significant deterioration. It requires resolution authorities to draw up resolution plans detailing how a firm would be resolved in the event of failure. These plans aim to minimize the impact on financial stability and ensure the continuity of critical functions. It includes provisions for the regular review of the governance system and the introduction of macro-prudential considerations into the risk management activities of insurance and reinsurance undertakings. This ensures that these companies are better equipped to manage systemic risks and maintain their operational Resilience.
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