Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.5.1.2:4.5.1.2 The implementation of the resolution decision

Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.5.1.2

4.5.1.2 The implementation of the resolution decision

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After the resolution decision has been taken, this is implemented by the relevant resolution authority by taking a resolution action. This entails the application of one or more resolution tools and/or the exercise of one or more resolution powers, as further discussed in sections 4.5.3 and 4.5.4.

In order to take a resolution action, resolution authorities can either (a) issue an executive order in accordance with national administrative competences and procedures, without exercising control over the bank in resolution or (b) exercise control over the bank in resolution.1 If the resolution authorities take control of a bank in resolution they can exercise all the rights and powers conferred on the shareholders, other owners and the management body of the bank in resolution.2 This power can be applied to operate and conduct the activities and services of the bank in resolution with all the powers of its shareholders and management body, and to manage and dispose of the assets and property of the bank in resolution.3 The control may be exercised directly by the resolution authority or indirectly by a person or persons appointed by the resolution authority. The voting rights conferred by shares or other instruments of ownership of the bank in resolution cannot be exercised by the shareholders or other owners of instruments during the period of resolution.4

Resolution tools

Both in and outside the SRM, the application of the resolution tools takes place by the national resolution authorities. Where the SRB has adopted a resolution scheme, this sets out the details of the resolution tools to be applied by the national resolution authorities to the bank or banking group in resolution. The national resolution authorities apply these in accordance with the relevant provisions of the BRRD as transposed into national law.5

In the case of Banco Popular, the Spanish resolution authority (the FROB) adopted a resolution to adopt the measures required to implement the resolution scheme of the SRB.6

Resolution powers

The exercise of the resolution powers also takes place by the national resolution authorities, both in and outside the SRM. The resolution powers are set out in Articles 63 up to 72 BRRD. The SRMR does not provide for equivalent provisions. When the SRB adopts a resolution scheme, the national resolution authorities should take all necessary measures to implement this by exercising their resolution powers under national law transposing Articles 63 up to 72 BRRD and in accordance with the conditions laid down in national law.7

The SRB closely monitors the execution of the resolution scheme by the national resolution authorities. For that purpose the national resolution authorities should provide certain information to the SRB. On the basis of the information provided, the SRB may give instructions.8 Where a national resolution authority has not applied or has not complied with a decision by the SRB or has applied it in a way which poses a threat to any of the resolution objectives or to the efficient implementation of the resolution scheme, the SRB may order a bank or banking group in resolution:

(a)

to transfer to another person specified rights, assets or liabilities;

(b)

to require the conversion of any debt instruments which contain a contractual term for conversion;

(c)

to adopt any other necessary action to comply with the decision in question.9

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