8.6.6 Business reorganisation plan for all ‘going concern’ solutions

The restructuring process under the resolution framework could in the author’s view be improved by providing that a business reorganisation plan is not only required in case the bail-in tool is applied for recapitalisation purposes, but also when a transfer tool is applied as a ‘going concern’ solution (e.g., when this tool is used to transfer all shares in a bank to a new shareholder, or when the asset separation tool is used, while the failing bank remains on the market). In that situation, the bank will also remain on the market as an autonomous entity, which in the author’s view justifies the restructuring of that bank (where applicable, in cooperation with the purchaser). Imposing the requirement to prepare a business reorganisation plan for all ‘going concern’ solutions may contribute to a level playing field, since this ensures that the restructuring takes place along the same lines.

In the author’s view, competition concerns can arise when a bank in resolution continues as an autonomous entity, even if no State aid is involved. When a bank is put in resolution, the resolution authorities can exercise powers that interfere in the relations that banks have with third parties, such as their shareholders and creditors. Banks that are not put in resolution cannot interfere in the same way in the relations that they have with their third parties. This may create distortions in the level playing field. These competition concerns should be addressed by the resolution authorities, preferably in a business reorganisation plan.1

Requiring a business reorganisation plan for all ‘going concern’ solutions may also contribute to a level playing field in another way. The business reorganisation plan is drafted with the purpose of restoring the long-term viability of the bank. The restructuring plan that needs to be prepared when State aid in the form of restructuring aid is granted has the same purpose. Requiring a business reorganisation plan for all ‘going concern’ solutions ensures that competition concerns are addressed when a bank in resolution continues as an autonomous entity – also when no State aid is involved and therefore no restructuring plan is prepared.

In the author’s view, it would be an improvement if the resolution framework also provides for a restructuring process of a bank that is subject to precautionary recapitalisation. In this case, it should, however, be possible to apply the restructuring obligations proportionally, similar to the State aid regime for the banking sector.