Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.2.1:4.2.1 Member States develop own resolution regimes

Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.2.1

4.2.1 Member States develop own resolution regimes

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Prior to the BRRD and the SRMR, a number of Member States1 already adopted a national resolution regime in order to cope with the consequences of bank failure as a result of the GFC.2 Sharing common understandings on the ways in which resolution objectives can be pursued, the national resolution regimes displayed many technical similarities. Many technical aspects of the national resolution regimes, with the exception of the financing aspects and the bail-in technique, had their origins in earlier American resolution policy.3 To a large extent, the national resolution regimes built on global standards, developed by the Basel Committee on Banking Supervision (Basel Committee) and, primarily, by the Financial Stability Board (FSB).4

The FSB, established by the Group of Twenty (G20) in April 2009, and the Basel Committee, established by the Group of Ten (G10) at the end of 1974, took a leading role in the necessary reform of the banking landscape. On 20 October 2010, the FSB published its recommendations concerning the reduction of the moral hazard posed by systemically important financial institutions.5 The Basel Committee issued its Recommendations on cross-border bank resolution6 in March 2010 and the Basel III rules text, which presents the details of global regulatory standards on bank capital adequacy and liquidity, in December 2010.

In July 2011 the Basel Committee published a report on the status of national resolution regimes.7 The Basel Committee distinguished three types of resolution regimes in its report: (i) special resolution regimes that enable authorities to take control of banks and other financial group companies before or on insolvency and that provide a wider range of resolution or stabilisation powers thereafter (these were adopted in the UK, Germany, Spain and the Netherlands), (ii) special administration or management regimes which are hybrid administrative/judicial regimes in which the banking supervisors or resolution authorities appoint special officials (variously referred to as special administrators, provisional administrators, special managers or statutory managers) to implement resolutions (these were adopted in Belgium, France and Italy) and (iii) mixed regimes without the full range of powers exhibited by the first two groups, in some cases because the powers can only be exercised with the consent or on a majority vote of shareholders and/or creditors, and in some cases because the regime strongly relies on court-administered proceedings, in particular in the insolvency liquidation phase (this regime was adopted in Luxembourg).8

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