2023/0112/COD: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action

A proposed new DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU as regards early intervention measures, conditions for resolution and financing of resolution action was published in the Official Journal (OJ) of the EU. The proposed new directive is part of a series of legislative measures known as the so-called 2023 Crisis Management and Deposit Insurance Legislative Package. The key purpose of the package is to strengthen the current bank resolution and deposit insurance frameworks so as to increase financial stability in the event of bank failures, protect tax payers money from being used to bail out failing institutions, and to provide further protection for depositors.
This particular directive would modify the Bank Recovery and Resolution Directive (BRRD) primarily to improve the procedures involved in the early intervention and preparation for resolution (including notification procedures), revise the provisions of the public interest assessments to foster the application of industry-funded resolutions, clarify and – to some extent – expand the (possible) use of Deposit Guarantee Scheme (DGS) in resolution events, and change the hierarchy of claims and depositor preference that is to be applied in resolution scenarios. Specifically, the proposed amendments would include the following key provisions, among others:
– similar to the proposed changes to the Single Resolution Mechanism Regulation (SRMR), the BRRD would be modified to include new provisions as regards the cooperation and communication between national competent authorities (NCAs) and resolution authorities (RAs) in the member states prior or in the run-up to a resolution. In detail, the changes would require national competent authorities to notify resolution authorities, when NCAs adopt early intervention measures, have determined that early intervention measures would be appropriate, or when they are applying any such measures.
– again similar to the proposed changes to the SMRD, the BRRD would be modified to enhance certain powers of the resolution authorities when preparing for an institution’s resolution, e.g. to request additional information from the NCA or require an affected institution to put up a digital platform that allows the marketing of the institution to potential buyers.
– in the context of public interest assessments, the objectives of a resolution would be amended to provide that „resolution should be preferred if insolvency would be more costly for the DGS“ and to provide that industry-funded resolutions (e.g. via the use of the Single Resolution Fund (SRF) or a DGS) need to be considered preferable as compared to national resolution measures;
– also in the context of public interest assessments, the procedure of the assessment would be somewhat altered to require the consideration of all „extraordinary public financial support“ when comparing the two alternatives, insolvency or resolution.
– similar to the proposed changes to the SRMR, the provisions as regards to when an insolvency should be chosen over a resolution would be amended to provide that an insolvency proceeding by member states should only be chosen when it reaches the objectives of the resolution framework (financial stability, protection of depositors and taxpayers) better than a resolution (leaving the proof of burden on national competent authorities or better their resolution authorities);
– the use of DGS funds in case of resolution and transfer of an entity would be clarified in various aspects, including that DGS funds may be used to support transfer transactions even beyond the eligible deposit coverage or for otherwise non-eligible deposits provided that certain conditions are met or that DGS funds would count towards the 8% total liabilities and own funds (TLOF) requirements for accessing the resolution financing arrangement by institutions subject to minimum requirements for own funds and eligible liabilities (MREL).
– the BRRD would be modified to remove the three-tier ranking of deposits in case of resolution to provide a single-tier structure as outlined below:
Figure 1: New ranking of claims in case of resolution

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As the above summary only provides a very brief description of the proposed directive, please refer to the enclosed legal document for more detailed, comprehensive information.