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Determining whether an institution is failing or likely to fail is the necessary element to start any resolution process as it represents one of the three cumulative conditions for triggering resolution. This assessment is carried out by the supervisors, but Member States may additionally grant this power to resolution authorities.
Despite the fact that supervisors and resolution authorities would follow different procedures when determining whether an institution is failing or likely to fail, their decisions should be based on the same criteria and objective elements.
This underlying principle is reflected in the final Guidelines, which lists under one single section all objective elements for determining whether an institution is failing or likely to fail. These elements are applicable to both supervisors and resolution authorities.
In addition, the Guidelines specify different sets of procedural rules addressed to each of these authorities, and establish the link between the supervisory review and evaluation process (SREP) and failing or likely to fail determination made by the supervisors.
With the aim of enhancing the coordination of supervisory and resolution practices, these Guidelines also provide additional guidance on the consultation and exchange of information between these authorities when deciding if an institution is failing or likely to fail.
Guidelines on failing or likely to fail