by Keith Zahra
The European Banking Authority has launched a discussion paper exploring ways on how to enhance the Bank Recovery and Resolution Directive (BRRD) framework on early intervention measures. The objective is to further enhance crisis management tools available for competent authorities in addition to well-established and widely used supervisory powers laid down in the Capital Requirements Directive (CRD) and in the Single Supervisory Mechanism Regulation (SSMR).
The BRRD introduced early intervention measures (EIMs) to expand the existing set of powers available to supervisors towards institutions in difficulties. While monitoring the application of EIMs in 2015-2018, the EBA observed a limited use of EIMs across the European Union (EU) during that period. Instead of EIMs, the competent authorities often preferred to apply other pre-BRRD supervisory powers available to them.
The EBA investigated the reasons for these supervisory practices. While recognising that EIMs could be successfully implemented under the existing regulatory framework, the EBA identified some challenges in their application, and is now putting for discussion potential solutions aimed at enhancing the framework.