Austria's National Council (Nationalrat) adopted a draft bill proposed by the Government introducing a new statute regarding bank recovery/resolution (Bankeninterventions- und -restrukturierungsgesetz - BIRG) and an amendment to the Austrian Banking Act regarding early intervention.
Due to the current discussions at the European level, the Austrian legislator has, however, refrained from also introducing into Austrian law firm resolution powers (e.g. power of resolution authorities to suspend certain obligations/to restrict the enforcement of security interests/to temporarily suspend termination rights under financial contracts), and resolution tools (sale of business/bridge institution/asset separation/bail-in) available under the RRD. The Austrian legislator argues that a national solo run regarding resolution powers/tools could potentially have negative effects on the financial stability and economic reputation of the Republic of Austria.
Main proposals
Recovery plan (Sanierungsplan): Austrian credit institutions have to present a recovery plan to the Austrian Financial Market Authority (FMA), in which they describe measures proposed to restore their financial situation following significant deterioration. Trigger points have to be proposed by the institution itself. The plan is subject to review by the FMA.
Resolution plan (Abwicklungsplan): Austrian credit institutions have to present a resolution plan to the FMA, in which they describe measures proposed to ensure controlled resolution or reorganisation. No trigger points are specified. The plan is subject to review by the FMA. In consultation with the Austrian Central Bank (OeNB), the FMA assesses the extent to which institutions are resolvable. If the FMA determines that there are potential impediments to the resolvability of an institution, it may require the institution to draw up service agreements to cover the provision of critical economic functions.
Resolvability: The BIRG will not, for the time being, introduce the firm resolution powers/tools available under RRD into Austrian law.
Early intervention mechanism: The FMA has to impose certain early intervention measures on an Austrian credit institution where such credit institution does not comply with the capital or liquidity requirements under the CRR or where a violation of such requirements is imminent. Such expected violation is defined as a significant deterioration of the bank's asset, revenue, liquidity or refinancing situation.
Early intervention measures moreover apply if a credit institution upon the occurrence of a trigger event does not take the measures described in its recovery plan or in the event that an institution does not comply with an FMA request to remedy deficiencies in its recovery/resolutions plan or potential impediments to the implementation of the recovery plan/the resolvability of that institution.
Early intervention measures: In addition to other measures available under the Austrian Banking Act, the FMA may apply the following early intervention measures:
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require the institution to draw up a recovery plan and to implement one or more of the arrangements and measures described in such plan;
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require the institution to improve and strengthen its risk management; (require the institution to) convene a share-holder meeting;
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propose the agenda of a shareholder meeting and certain decisions;
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require the institution to submit a negotiation plan providing for voluntary debt restructuring with its creditors;
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on-site assessment of an institution's assets and liabilities conducted by the OeNB.
Transitional provisions: The transitional provisions of the BIRG ensure a phased introduction of the requirements to draw up and present recovery/resolution plans starting with larger credit institutions/groups and those institutions receiving direct financial aid under EFSF/ESM that will have to present their recovery plans by 1 July 2014 and their resolution plans by 31 December 2014 at the latest.
Subject to completion of the further legislative procedures, the new law will enter into force on 1 January, 2014.
Full press release (in German)
Full minutes of the National Council meeting (in German)
© Parliament of the Republic of Austria
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