4.3.3.2 Resolution conditions

What triggers resolution? For a resolution action to take place, three resolution conditions have to be met: (i) the bank is failing or likely to fail1; (ii) there is no reasonable prospect that any alternative private sector measures would prevent the failure of the bank within a reasonable timeframe; and (iii) a resolution action is necessary in the public interest. These resolution conditions are listed in Art. 32(1) BRRD and elaborated in Art. 32(4) and (5) BRRD.2

With respect to the first resolution condition, the following aspect is worth noting: one of the instances in which a bank is considered to be ‘failing or likely to fail’ is when it needs “extraordinary public financial support” 3– in other words: when it needs State aid. Thus, the granting of State aid to a bank triggers resolution (provided that the other resolution conditions are also met). There are, however, three exceptions. These will be discussed in more detail in section 4.4.1.

Since putting a bank under resolution has far-reaching implications, the assessment whether the resolution conditions are met, is very important. Equally important is the question by whom the resolution conditions are assessed.

In that regard, a distinction should be made between banks outside the Eurozone (to which the SRM-Regulation does not apply) and banks inside the Eurozone (to which the SRM-Regulation applies). As regards the latter, a further distinction can be made between banks that fall under the responsibility of the SRB and banks that fall under the responsibility of the national resolution authorities. Roughly speaking, significant banks and cross-border banks fall under the responsibility of the SRB, whilst the ‘small banks’ fall under the responsibility of the national resolution authorities.4

The following table provides an overview of the authorities that decide whether the resolution conditions are met. This can be the NCA (national competent authority), NRA (national resolution authority), SRB (Single Resolution Board) or ECB (European Central Bank).

The SRM became fully operational on 1 January 2016, whereas the BRRD (with the exception of the provisions on the bail-in) already had to be implemented in national legislation by 31 December 2014.5 So there was a ‘transition period’ from 1 January 2015 until 31 December 2015. The situation for banks inside the Eurozone in this transition period reflects the situation for banks outside the Eurozone nowadays: only the BRRD applies. In such a situation, the resolution authority determines whether the conditions of ‘no alternatives’ and ‘in the public interest’ are met, while the competent authority determines whether the condition of ‘failing or likely to fail’ is met.

The allocation of tasks can be illustrated by the case of the Cooperative Bank of Peloponnese. The Commission decision on the Cooperative Bank of Peloponnese indicates that the Bank of Greece determined that the bank was ‘failing or likely to fail’.6 The Bank of Greece is the competent authority as well as the resolution authority. In that regard, the Credit and Insurance Committee (CIC) of the Bank of Greece has been entrusted with prudential supervision, whilst the Resolution Measures Committee (RMC) has been entrusted with issuing all the decisions and recommendations of the Bank of Greece as resolution authority. With respect to the resolution of the Cooperative Bank of Peloponnese, it was the Credit and Insurance Committee (CIC), in consultation with the Resolu-tion Measures Committee (RMC), that determined (by decision no. 170/4 of13 December 2015) that the condition of ‘failing or likely to fail’ was met.