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EBF agrees that cross-border recognition is critical to the effectiveness of this.
For this reason, EBF has firmly supported the development of the Financial Stability Board’s guidelines for cross-border recognition and have encouraged the development of statutory recognition regimes for this purpose. Such an approach will deliver the objectives of resolution but in a way that provides legal and commercial certainty.
It is disappointing that the EBA has not seen it possible to use the mandate under Article 55(3) to focus the requirements of Article 55 in a proportionate manner onto the liabilities most likely to be used to satisfy loss absorbency requirements.
This may lead to clearly unreasonable burdens as counterparties will be required to submit themselves contractually to resolution measures in relation to liabilities which will not contribute in any meaningful way to the total bail-in amount.
In addition, this opens a gap between the EU rules and those which are likely to apply more broadly which will place European headquartered institutions at a significant disadvantage. EBF encourages the EBA to work with the European Commission to identify the means by which the BRRD requirements can be aligned with the FSB guidelines.
Notwithstanding their concerns about the interpretation of the mandate, EBF is disappointed that the proposed guidelines exacerbate the practical challenges associated with this requirement.
For this reason, EBF urges the EBA to reconsider the proposed guidance in relation to secured liabilities and the interpretation of the effective date.