11.2.4 Impact BRRD

The BRRD has implications for the relevant characteristic discussed in the current section. The BRRD introduces general principles governing resolution. One of those principles is that the management body and senior management of the bank under resolution are replaced.1 However, there is an exception to this principle: “in case the retention of the management body and senior management, in whole or in part, as appropriate to the circumstances, is considered to be necessary for the achievement of the resolution objectives”.2

As explained in section 4.4.1, the granting of State aid to an ailing bank will usually trigger the resolution of that bank. Consequently – and in line with Art. 34(1)(c) BRRD – the management body and senior management of that bank should be replaced. This replacement of the bank’s management will probably be viewed positively by the Commission in its decision on the State aid to that bank.

It should be recalled there are three exceptions to the general rule that State aid will trigger resolution. So it is possible to grant State aid to a bank without triggering the resolution of the beneficiary bank. This means that in those three situations, Art. 34(1)(c) BRRD does not apply to that bank. This does not mean, however, that its senior management does not have to be replaced. Indeed, notwithstanding the fact that the resolution principles of the BRRD do not apply, the 2013 Banking Communication still applies to this situation.

Furthermore, it is worth pointing out that a replacement of the bank’s management is also possible before the resolution-stage. In the early intervention- stage, competent authorities have the power to replace the management body and senior management. Pursuant to Art. 27(1)(d) BRRD, competent authorities can require one or more members of the management body or senior management to be removed or replaced if those persons are found unfit to perform their duties pursuant to Article 13 of CRD IV. Article 28 BRRD provides for the possibility to remove the senior management in its entirety, when there is a significant deterioration in the financial situation of the bank or where there are serious infringements of law or serious administrative irregularities.

Another interesting aspect of the BRRD is that it gives a definition of the terms ‘management body’ and ‘senior management’. More precisely, the BRRD refers to the definitions as provided by CRD IV. Pursuant to this definition, ‘senior management’ means those natural persons who exercise executive functions within an institution and who are responsible, and accountable to the management body, for the day-to-day management of the institution.3