EBF response to EBA consultation paper on the appropriate target level basis for resolution financing arrangements under BRRD

02 September 2016

The EBF is not in favour of changing the reference basis of the target level. Given the early stage of build-up of resolution financing arrangements and the delays in implementing the BRRD in national law in some countries, EBF believes it is early to revise the legal basis for these arrangements.

Resolution authorities do not have sufficient data on the impact of implementation of exante financed resolution funds – in particular the accelerated SRF – in order to be able to assess the costs and benefits of the existing arrangements, let alone the relative merits of the proposals outlined in the interim report.

On this basis alone European Banking Federation (EBF) urge the European Banking Authority (EBA) to recommend that the EU Commission only consider any legislative proposal to change the target level at a later date when more experience and data has been gained.

Key points:

• All EBF members agree that the target level for resolution financing arrangements in total and for individual Members States should not increase or decrease.
• The EBF is therefore not in favour of changing the basis of the target level for resolution financing arrangements in the BRRD at this time. Given the early stage of build-up of resolution funds and further reforms in progress to set TLAC and MREL, EBF believes it is premature to consider a revision of the legal basis for the resolution financing arrangements.
• Individual contributions by banks should remain dynamic and smooth while being practical, simple and transparent. Changing the rules in the course of this build up phase would add complexity and create confusion in a context where the industry is in dire need of stable rules and cost bases.
• The target level basis for the SRF and the BRRD should be the same to ensure a level playing field between banking union and other banks in the wider EU 28.
• The interaction of the resolution financing arrangements framework with the MREL Review and TLAC implementation needs to be taken into account.
• A stable target level is desirable. Total liabilities as a measure may be unsuitable as a target level, because it is more volatile than one based on covered deposits which tends to be more stable over time. Also, total liabilities varies considerably depending on the applicable accounting framework.

Response

© EBF