Inside this Topic Guide
The EU Bank Recovery and Resolution Directive (BRRD) aims to harmonise Member States' resolution frameworks for banks and investment firms. The BRRD was adopted in June 2014 with a national implementation deadline of January 2015 (other than bail-in provisions, for which Member States were able to defer implementation until January 2016, although some Member States, including the UK, implemented bail-in provisions along with the rest of the Directive in January 2015).
In June 2019, a Directive amending BRRD (BRRD 2) was published in the Official Journal. BRRD 2 introduces a range of reforms of the BRRD, including changes relating to resolution authorities' moratoria powers, contractual recognition of bail-in and proposed amendments to the rules on minimum requirements for own funds and eligible liabilities (MREL) to bring these in line with the Financial Stability Board's (FSB) total loss absorbing capacity (TLAC) standard.
Provisions on the ranking of unsecured debt instruments in insolvency hierarchy, including the creation of a new TLAC-eligible subordinated debt class, were published in the Official Journal in December 2017.
Key features of the BRRD
- EU banks
- Qualifying EU investment firms
- EU holding companies of EU banks and qualifying EU investment firms
- EU financial institution subsidiaries of the above
- EU branches of non-EU banks and investment firms
- Individual institutions and groups required to prepare recovery plans and to take steps to improve resolvability
- Resolution authorities to prepare resolution plans and to conduct resolvability assessments of institutions
- Powers for regulators to intervene pre-resolution to require institutions to take remedial steps (e.g. change management, restructure debt, effect legal and operational changes) to avert need for resolution
Crisis management – resolution
- Regulatory intervention threshold that permits resolution action before balance sheet or cash flow insolvency
- Key resolution tools: sale of business, bridge institution, asset separation and bail-in
- Main resolution objectives: protect financial stability, preserve critical functions, avoid taxpayer losses
- Key resolution principles: losses fall in line with ordinary insolvency hierarchy (shareholders and junior debt bear losses first)
- Measures for resolving groups and third country entities
- National resolution funds, financed via ex ante industry contributions
- Limits on use of resolution funds to absorb losses
- Depositor preference reduces risk to Deposit Guarantee Scheme
- 'No creditor worse off' principle limits application of resolution tools ex ante and sets ex post benchmark for creditor compensation
|Status:||BRRD was published in the Official Journal on 12 June 2014 and entered into force on 2 July 2014. The national implementation deadline was 31 December 2014, with implementing laws and regulations to apply from 1 January 2015. By way of exception, Member States could delay application of provisions relating to the bail-until 1 January 2016.
Provisions amending BRRD in relation to the ranking of unsecured debt instruments in insolvency hierarchy were published in the Official Journal on 27 December 2017. The national implementation deadline was 29 December 2018, with new rules to apply from 1 January 2019.
BRRD 2 was published in the Official Journal on 7 June 2019. The national implementation deadline was 28 December 2020.
|Next:||Member States had until 28 December 2020 to implement BRRD 2. Changes to MREL target levels will be phased in, with intermediate target levels to apply from 1 January 2022 and full application from 1 January 2024 (subject to resolution authority discretion to set a longer transitional period in certain cases).
On 18 April 2023, the European Commission published legislative proposals to reform the bank crisis management and deposit insurance (CMDI) framework, which includes proposed amendments to the BRRD. The Commission invited the European Parliament and Council to reach agreement on the proposed reform before the next Parliamentary elections in 2024. For more information, see the 'EU CMDI framework review' section below.
|Implementation:||Deadlines for national implementation of BRRD and the Directive on the ranking of unsecured debt instruments in insolvency hierarchy have passed.
Member States had until 28 December 2020 to implement BRRD 2 into national law.
|Chris Bates (London)||José Guardo (Madrid)|
|Marc Benzler (Frankfurt)||Steve Jacoby (Luxembourg)|
|Lucio Bonavitacola (Milan)||Frédérick Lacroix (Paris)|
|José Manuel Cuenca (Madrid)||Caroline Meinertz (London)|
|Caroline Dawson (London)||Simon Sinclair (London)|
|Maria de Elizalde (London)||Rodrigo Uría (Madrid)|
|Simon Gleeson (London)||Iñigo Villoria (Madrid)|
|Frank Graaf (Amsterdam)|
On 18 April 2023, the European Commission published a package of proposals to reform the crisis management and deposit insurance (CMDI) framework relating to banks and other credit institutions, as set out in the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), Single Resolution Mechanism Regulation ((EU) 806/2014) (SRMR) and Deposit Guarantee Schemes Directive (2014/49/EU) (DGSD). The Commission has invited the EU Parliament and Council to reach agreement on the proposed reform of the CMDI framework before the next Parliamentary elections in 2024.
The proposed amendments to the BRRD relate to issues including early intervention measures, the public interest assessment (PIA), the use of national deposit guarantee scheme (DGS) funds in resolution, and depositor preference in the hierarchy of claims.
- Legislative Observatory Procedure File 2023/0112(COD) - link forthcoming
- Proposed amendments to BRRD as regards early intervention measures, conditions for resolution and financing of resolution action
- Proposed amendments to the Daisy Chain Act as regards certain aspects of MREL
- Impact assessment | summary
- Press release
Background and preparatory materials
- (18 April 2023) ECB and SRB joint press release on CMDI reform proposals
- (18 April 2023) Eurogroup President statement on CMDI reform proposals
- (16 June 2022) Eurogroup statement on the future of the Banking Union
- (18 May 2021) SRB blueprint for the CMDI review
- (19 April 2021) Commission call for advice to the EBA on funding in resolution and insolvency as part of the review
- (25 February 2021) Public consultation on the review of the CMDI framework
- (26 January 2021) Technical consultation on the review of the CMDI framework
- (11 November 2020) BRRD/SRMR/DGSD Review Roadmap
- (30 April 2019) Commission report on the application and review of BRRD and SRM Regulation