Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.3.2.2:7.3.2.2 Cooperation outside of resolution

Public funding of failing banks in the European Union (LBF vol. 19) 2020/7.3.2.2

7.3.2.2 Cooperation outside of resolution

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Restructuring of a bank can also take place outside of resolution. For example, if a bank is the subject of precautionary recapitalisation, the restructuring obligations under the State aid regime for the banking sector are triggered. Although no business reorganisation plan is required to be drawn up in such a situation, the resolution authority could still be involved in the restructuring process because of the periodical (at least annual) evaluation of the resolution plan.1 For example, if a bank is the subject of precautionary recapitalisation, this may be a reason for the resolution authority to evaluate the resolution plan and to require any restructuring on that basis. Cooperation between the resolution authority and the Commission in respect of restructuring outside of resolution is however again a topic that has not received any attention in the resolution framework.

An example of a restructuring process of a bank subject to precautionary recapitalisation, is the restructuring of MPS. The Commission and the Italian authorities agreed on a far-reaching restructuring plan for MPS with the purpose of ensuring MPS's viability in the long term. On the basis of the public information available on the restructuring of MPS, it is not clear whether the resolution authority was involved in the restructuring process and whether the resolution plan has been updated following the precautionary recapitalisation.

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