#52026AG0004(02)Council Position on Amendments to BRRD Regarding Early Intervention, Resolution Conditions, Funding and Valuation Services
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This law aims to amend the existing framework for the management of bank crises by enhancing early intervention measures and streamlining the resolution process for small and medium-sized banks. It establishes stricter conditions for using funding from deposit guarantee schemes while ensuring that the principles of shareholder and creditor responsibility are upheld. The amendments also seek to increase cross-border coordination among resolution authorities and standardize the treatment of preventive measures to improve overall financial stability.
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Key Changes
- Tighter Public Interest Assessment (PIA) that requires demonstration that resolution is better than liquidation.
- Simplified Least Cost Test (LCT) with capped DGS interventions at the gross amount of covered deposits.
- Clarified mobilization process for industry-funded tools for resolution financing under strict conditions.
Obligations
What this law requires
Resolution authorities must conduct a tightened Public Interest Assessment (PIA) demonstrating that resolution better achieves statutory objectives than liquidation before resolution may be used
Resolution authorities must apply a simplified Least Cost Test (LCT) that caps Deposit Guarantee Scheme (DGS) interventions at the gross amount of covered deposits
Resolution authorities must establish explicit sequencing and stricter safeguards for mobilizing industry-funded tools in resolution financing, subject to burden-sharing requirements
Resolution authorities must preserve the super-preference of covered deposits within a three-tier creditor hierarchy during resolution
DGS funding for resolution may only be accessed in exceptional cases and under strict conditions, with private resources prioritized before DGS funds