Changes from adopted text to adopted text

RemovedP9_TA(2024)0326

AddedP10_TA(2026)0092

Early intervention measures, conditions for resolution and funding of resolution action (SRMR3)

Committee on Economic and Monetary Affairs

RemovedPE753.695

AddedPE784.265

ChangedEuropean Parliament legislative resolution of 2426 AprilMarch 20242026 on the proposalCouncil forposition at first reading with a view to the adoption of a regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014 as regards early intervention measures, conditions for resolution and funding of resolution action (COM(2023)0226(15389/1/25 – C9-0139/2023C10-0072/2026 – 2023/0111(COD))

Changed(Ordinary legislative procedure: firstsecond reading)

The European Parliament,

Changed– having regard to the CommissionCouncil proposalposition toat Parliamentfirst andreading the(15389/1/25 Council– (COM(2023)0226,C10-0072/2026),

Removed– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90139/2023),

Removed– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Central Bank of 5 July 2023,

– having regard to the opinion of the European Economic and Social Committee of 13 July 2023,

Removed– having regard to Rule 59 of its Rules of Procedure,

Added– having regard to its position at first reading on the Commission proposal to Parliament and the Council (COM(2023)0226),

Changed– having regard to theArticle report294(7) of the CommitteeTreaty on Economicthe andFunctioning Monetaryof Affairsthe (A9-0155/2024),European Union,

Change 1

Removed1. Adopts its position at first reading hereinafter set out;

Added– having regard to the provisional agreement approved by the committee responsible under Rule 75(4) of its Rules of Procedure,

Removed2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

Added– having regard to Rule 68 of its Rules of Procedure,

Removed3. Instructs its President to forward its position to the Council, the Commission and the national parliaments;

Added– having regard to the recommendation for second reading of the Committee on Economic and Monetary Affairs (A10-0067/2026),

RemovedP9_TC1-COD(2023)0111

Added1. Approves the Council position at first reading;

RemovedPosition of the European Parliament adopted at first reading on 24 April 2024 with a view to the adoption of Regulation (EU) 2024/… of the European Parliament and of the Council amending Regulation (EU) No 806/2014 as regards early intervention measures, conditions for resolution and funding of resolution action*

Added2. Notes that the act is adopted in accordance with the Council position;

Removed(Text with EEA relevance)

Added3. Instructs its President to sign the act with the President of the Council, in accordance with Article 297(1) of the Treaty on the Functioning of the European Union;

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Added4. Instructs its Secretary-General to sign the act, once it has been verified that all the procedures have been duly completed, and, in agreement with the Secretary-General of the Council, to arrange for its publication in the Official Journal of the European Union;

RemovedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Added5. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

RemovedHaving regard to the proposal from the European Commission,

RemovedAfter transmission of the draft legislative act to the national parliaments,

RemovedHaving regard to the opinion of the European Central Bank,

RemovedHaving regard to the opinion of the European Economic and Social Committee,

RemovedActing in accordance with the ordinary legislative procedure,

RemovedWhereas:

Removed(1) The Union resolution framework for credit institutions and investment firms (‘institutions’) was established in the aftermath of the 2008-2009 global financial crisis and following the internationally endorsed Key Attributes of Effective Resolution Regimes for Financial Institutions of the Financial Stability Board. The Union resolution framework consists of Directive 2014/59/EU of the European Parliament and of the Council and Regulation (EU) No 806/2014 of the European Parliament and of the Council. Both acts apply to institutions established in the Union, and to any other entity that falls under the scope of that Directive or that Regulation (‘entities’). The Union resolution framework aims at dealing in an orderly manner with the failure of institutions and entities by preserving institutions and entities’ critical functions and avoiding threats to financial stability, and at the same time protecting depositors and public funds. In addition, the Union resolution framework intends to foster the development of the internal market in banking by creating a harmonised regime to address cross-border crises in a coordinated way and by avoiding level playing field issues.

Removed(1a) At present, the banking union rests on just two of its intended three pillars, namely, the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). It therefore remains incomplete, due to the absence of its third pillar, the European deposit insurance scheme (EDIS). The completion of the banking union forms an integral part of economic and monetary union and of financial stability, most notably by mitigating the risks of so-called ‘doom loop’ that arise as a result of the bank-sovereign nexus.

Removed(2) Several years into its implementation, the Union resolution framework as currently applicable does not deliver as intended with respect to some of those objectives. In particular, while institutions and entities have made significant progress towards resolvability and have dedicated significant resources to that end, in particular through the build-up of the loss absorption and recapitalisation capacity and the filling-up of resolution financing arrangements, the Union resolution framework is seldom resorted to. Failures of certain smaller and medium-sized institutions and entities are instead mostly addressed through unharmonised national measures. Regrettably, taxpayer money is still used rather than industry-funded safety nets, including resolution financing arrangements. That situation appears to arise from inadequate incentives. Those inadequate incentives result from the interplay of the Union resolution framework with national rules, whereby the broad discretion in the public interest assessment is not always exercised in a way that reflects how the Union resolution framework was intended to apply. At the same time, the Union resolution framework saw little use due to the risks for depositors of deposit-funded institutions to bear losses to ensure that those institutions can access external funding in resolution, in particular in the absence of other bail-inable liabilities. Finally, the fact that there are less stringent rules on access to funding outside resolution than in resolution has discouraged the application of the Union resolution framework in favour of other solutions, which often entail the use of taxpayers’ money instead of the own resources of the institution or entity or industry-funded safety nets. That situation in turn generates risks of fragmentation, risks of suboptimal outcomes in managing institutions and entities’ failures, in particular in the case of smaller and medium-sized institutions and entities, and opportunity costs from unused financial resources. It is therefore necessary to ensure a more effective and coherent application of the Union resolution framework and to ensure that it can be applied when that is in the public interest, including for smaller and medium-sized institutions ▌.

Removed(3) Pursuant to Article 4 of Regulation (EU) No 806/2014, Member States which have established a close cooperation between the European Central Bank (ECB) and the respective national competent authorities are to be considered participant Member States for the purposes of that Regulation. However, Regulation (EU) No 806/2014 does not contain any details on the process for preparing the start of the close cooperation on resolution-related tasks. It is therefore appropriate to lay down those details.

Removed(4) The intensity, and level of detail, of the resolution planning work needed with respect to subsidiaries that have not been identified as resolution entities varies depending on the size and risk profile of the institutions and entities concerned, the presence of critical functions, and the group resolution strategy. The Single Resolution Board (the ‘Board’) should therefore be able to consider those factors when identifying the measures to be taken in respect of such subsidiaries and follow a simplified approach where appropriate.

Removed(5) An institution or entity that is being wound up under national law, following a determination that the institution or entity is failing or likely to fail and a conclusion by the Board that its resolution is not in the public interest, is ultimately heading towards market exit. That implies that a plan for actions to be taken in case of failure is not needed, irrespective of whether the competent authority has already withdrawn the authorisation of the institution or entity concerned. The same applies for a residual institution under resolution after the transfer of assets, rights, and liabilities in the context of a transfer strategy. It is therefore appropriate to specify that in those situations, the adoption of resolution plans is not required.

Removed(6) The Board may currently prohibit certain distributions where an institution or entity fails to meet the combined buffer requirement when considered in addition to the minimum requirement for own funds and eligible liabilities (‘MREL’). However, to ensure legal certainty and alignment with the existing procedures for the implementation of decisions taken by the Board, it is necessary to specify more clearly the roles of the authorities involved in the process for prohibiting distributions. It is therefore appropriate to lay down that the Board should address an instruction to prohibit such distributions to the national resolution authority, which should implement the Board’s decision. In addition, in certain situations, an institution or entity might be required to comply with the MREL on a different basis than the basis on which that institution or entity is required to comply with the combined buffer requirement. That situation creates uncertainties as to the conditions for the exercise of the Board’s powers to prohibit distributions and for the calculation of the Maximum Distributable Amount related to MREL. It should therefore be laid down that, in those cases, the Board should instruct national resolution authorities to prohibit certain distributions based on the estimate of the combined buffer requirement resulting from Commission Delegated Regulation (EU) 2021/1118. To ensure transparency and legal certainty, the Board should communicate the estimated combined buffer requirement to the institution or entity, which should then publicly disclose that estimated combined buffer requirement.

Removed(7) Directive 2014/59/EU and Regulation (EU) No 575/2013 lay down powers to be exercised by resolution authorities, some of which are not included in Regulation (EU) No 806/2014. In the Single Resolution Mechanism, this can create uncertainty as to who should exercise those powers and in what conditions they should be exercised. It is therefore necessary to specify how national resolution authorities should exercise certain powers set out only in Directive 2014/59/EU in relation to entities and groups that fall under the direct responsibility of the Board. In those cases, the Board should be able, where it deems necessary, to instruct national resolution authorities to exercise those powers. In particular, the Board should be able to instruct national resolution authorities to require an institution or entity to maintain detailed records of the financial contracts to which the institution or entity is a party, or to apply the power to suspend some financial obligations pursuant to Article 33a of Directive 2014/59/EU. However, given that the permissions for the reduction of eligible liabilities instruments laid down in Regulation (EU) No 575/2013 of the European Parliament and of the Council, which is also applicable to institutions and entities and liabilities subject to the MREL, do not require the application of national legislation, the Board should be able to grant those permissions to institutions or entities directly, without having to instruct national resolution authorities to exercise that power.

Removed(8) Regulation (EU) 2019/876 of the European Parliament and of the Council, Regulation (EU) 2019/877 of the European Parliament and of the Council and Directive (EU) 2019/879 of the European Parliament and of the Council implemented in Union law the international ‘Total Loss-absorbing Capacity (TLAC) Term Sheet’, published by the Financial Stability Board on 9 November 2015 (the ‘TLAC standard’), for global systemically important banks, referred to in Union law as global systemically important institutions (G-SIIs). Regulation (EU) 2019/877 and Directive (EU) 2019/879 also amended the MREL set out in Directive 2014/59/EU and in Regulation (EU) No 806/2014. It is necessary to align the provisions in Regulation (EU) No 806/2014 on the MREL with the implementation of the TLAC standard for G-SIIs with respect to certain liabilities that could be used to meet the part of the MREL that should be met with own funds and other subordinated liabilities. In particular, liabilities that rank pari passu with certain excluded liabilities should be included in the own funds and subordinated eligible instruments of resolution entities where the amount of those excluded liabilities on the balance sheet of the resolution entity does not exceed 5% of the amount of the own funds and eligible liabilities of the resolution entity and no risks related to the ‘no creditor worse off’ principle arise from that inclusion.

Removed(9) The rules for determining the MREL are mostly focused on setting the appropriate level of the MREL with the assumption of the bail-in tool as the preferred resolution strategy. However, Regulation (EU) No 806/2014 allows the Board to use other resolution tools, namely those relying on the transfer of the business of the institution under resolution to a private purchaser or to a bridge institution. It should therefore be specified that, in case the resolution plan envisages the use of the sale of business tool or of the bridge institution tool ▌, independently or in combination with other resolution tools, the Board should determine the level of the MREL for the resolution entity concerned on the basis of the specificities of those resolution tools and of the different loss-absorbing and recapitalisation needs those tools entail.

Removed(10) The level of the MREL for resolution entities is the sum of the amount of the losses expected in resolution and the recapitalisation amount that enables the resolution entity to continue to comply with its conditions for authorisation and enabling it to pursue its activities for an appropriate period. Certain preferred resolution strategies entail the transfer of assets, rights and liabilities to a recipient▌, in particular the sale of business tool. In those cases, the objectives pursued by the recapitalisation component might not apply to the same extent as in the case of an open-bank bail-in strategy, because the Board will not be required to ensure that the resolution entity restores compliance with its own funds requirements after resolution action. Nevertheless, the losses in such cases are expected to exceed the resolution entity’s own funds requirements. It is therefore appropriate to lay down that the level of the MREL of those resolution entities continues to include a recapitalisation amount that is adjusted in a way which is proportionate to the resolution strategy.

Removed(11) Where the resolution strategy envisages the use of resolution tools other than exclusively bail-in, the recapitalisation needs of the entity concerned will generally be smaller after resolution than in case of open bank bail-in. The calibration of the MREL in such a case should take that aspect into account when estimating the recapitalisation requirement. Therefore, when adjusting the level of the MREL for resolution entities the resolution plan of which envisages the sale of business tool or the bridge institution tool ▌, independently or in combination with other resolution tools, the Board should take into account the features of those tools, including the expected perimeter of the transfer to the private purchaser or to the bridge institution, the types of instruments to be transferred, the expected value and marketability of those instruments, and the design of the preferred resolution strategy, including the complementary use of the asset separation tool. Since the resolution authority has to decide on a case by case basis on any possible use in resolution of funds from the deposit guarantee scheme and since such decision cannot be assumed with certainty ex ante, the Board should not consider the potential contribution of the deposit guarantee scheme (in resolution when calibrating the level of the MREL. That approach also reduces the likelihood of moral hazard by ensuring that entities are not pre-emptively assuming that funds from the respective deposit guarantee scheme will be used to reach the 8% total liabilities and own funds target.

Removed▌

Removed(13) Pursuant to Article 4 of Council Regulation (EU) No 1024/2013, the ECB is competent to carry out supervisory tasks in relation to early intervention. It is necessary to reduce the risks stemming from diverging transpositions into national laws of the early intervention measures in Directive 2014/59/EU and to facilitate the effective and consistent application by the ECB of its powers to take early intervention measures. Those early intervention measures were created to enable competent authorities to remedy the deterioration of the financial and economic situation of an institution or entity and to reduce, to the extent possible, the risk and impact of a possible resolution. However, due to a lack of certainty regarding the triggers for the application of those early intervention measures and partial overlaps with supervisory measures, early intervention measures have seldom been used. The provisions of Directive 2014/59/EU concerning early intervention measures should therefore be mirrored in Regulation (EU) No 806/2014, thereby ensuring a single and directly applicable legal tool for the ECB, and the conditions for the application of those early intervention measures should be simplified and further specified. To dispel uncertainties concerning the conditions and timing for the removal of the management body and the appointment of temporary administrators, those measures should be explicitly identified as early intervention measures and their application should be subject to the same triggers. At the same time, the ECB should be required to select the appropriate measures to address a specific situation in compliance with the principle of proportionality. To enable the ECB to take into account reputational risks or risks related to money laundering or information and communication technology, the ECB should assess the conditions for the application of early intervention measures not only on the basis of quantitative indicators, including capital or liquidity requirements, level of leverage, non-performing loans or concentration of exposures, but also on the basis of qualitative triggers.

Removed(14) It is necessary to ensure that the Board is able to prepare for the possible resolution of an institution or entity. The ECB or the relevant national competent authority should therefore inform the Board of the deterioration of the financial condition of an institution or entity sufficiently early, and the Board should have the necessary powers for the implementation of preparatory measures. Importantly, to enable the Board to react as swiftly as possible to a deterioration of the situation of an institution or entity, the prior application of early intervention measures should not be a condition for the Board to make arrangements for the marketing of the institution or entity or to request information to update the resolution plan and prepare the valuation. To ensure a consistent, coordinated, effective and timely reaction to the deterioration of the financial situation of an institution or entity and to prepare properly for a possible resolution, it is necessary to enhance the interaction and coordination between the ECB, the national competent authorities and the Board. As soon as an institution or entity meets the conditions for application of early intervention measures, the ECB, the national competent authorities and the Board should increase their exchanges of information, including provisional information, and monitor the financial situation of the institution or entity jointly.

Removed(14a) Where the Board requires information that is necessary for the purposes of updating resolution plans, preparing for the possible resolution of an entity, or carrying out a valuation, the ECB or the relevant national competent authorities should provide the Board with that information to the extent that it is available to them. Where the relevant information is not already available to the ECB or the relevant national competent authorities, the Board and the ECB or the relevant national competent authorities should cooperate and coordinate to collect the information considered necessary by the Board. In the context of such cooperation, the national competent authorities should collect the necessary information having due regard to the principle of proportionality.

Removed(15) It is necessary to ensure timely action and early coordination between the Board and the ECB, or the relevant national competent authority, with respect to less significant cross-border groups when an institution or entity is still a going concern but where there is a material risk that that institution or entity may fail. The ECB or the relevant national competent authority should therefore notify the Board as early as possible of such risk. That notification should contain the reasons for the assessment of the ECB or of the relevant national competent authority and an overview of the alternative private sector measures, supervisory action or early intervention measures that are available to prevent the failure of the institution or entity within a reasonable timeframe. Such early notification should not prejudice the procedures to determine whether the conditions for resolution are met. The prior notification by the ECB or by the relevant national competent authority to the Board of a material risk that an institution or entity is failing or likely to fail should not be a condition for a subsequent determination that an institution or entity is actually failing or likely to fail. Moreover, if at a later stage the institution or entity is assessed to be failing or likely to fail and there are no alternative solutions to prevent such failure within a reasonable timeframe, the Board has to take a decision whether to take resolution action. In such a case, the timeliness of the decision to apply resolution action to an institution or entity can be fundamental to the successful implementation of the resolution strategy, in particular because an earlier intervention in the institution or entity can contribute to ensuring sufficient levels of loss absorption capacity and liquidity to execute that strategy. It is therefore appropriate to enable the Board to assess, in close cooperation with the ECB or the relevant national competent authority, what constitutes a reasonable timeframe to implement alternative measures to avoid the failure of the institution or entity. When conducting that assessment, the need to preserve the ability for the resolution authority and for the entity concerned to implement effectively the resolution strategy where that is ultimately needed should also be taken into account but should not prevent alternative measures from being taken. In particular, the envisaged timeframe for the alternative measures should be such that it does not put at risk the effectiveness of a potential implementation of the resolution strategy. To ensure a timely outcome and to enable the Board to prepare properly for the potential resolution of the institution or entity, the Board and the ECB, or the relevant national competent authority, should meet regularly, and the Board should decide on the frequency of those meetings considering the circumstances of the case.

Removed(16) To cover material infringements of prudential requirements, it is necessary to further specify the conditions for determining that parent undertakings, including holding companies, are failing or likely to fail. An infringement of those requirements by a parent undertaking should be material where the type and extent of such infringement is comparable with an infringement that, if committed by a credit institution, would have justified the withdrawal of the authorisation by the competent authority in accordance with Article 18 of Directive 2013/36/EU.

Removed(17) The resolution framework is meant to be applied to potentially any institution or entity, irrespective of its size and business model with a positive public interest assessment. To ensure such outcome, the criteria to apply the public interest assessment to a failing institution or entity should be specified. In that respect, it is necessary to clarify that, depending on the specific circumstances, certain functions of the institution or entity can be considered critical if their discontinuance would impact financial stability or critical services at regional level, in particular where the substitutability of the critical functions is determined by the relevant geographic market.

Removed(18) The assessment of whether the resolution of an institution or entity is in the public interest should reflect the consideration that depositors are better protected when deposit guarantee scheme funds are used more efficiently and the losses for those funds are minimised. Therefore, in the public interest assessment, the resolution objective of protecting depositors should be considered better achieved in resolution if opting for insolvency would be more costly for the deposit guarantee scheme.

Removed(19) The assessment of whether the resolution of an institution or entity is in the public interest should also reflect, to the extent possible, the difference between, on the one hand, funding provided through industry-funded safety nets (resolution financing arrangements or deposit guarantee schemes) and, on the other hand, funding provided by Member States from taxpayers’ money. Funding provided by Member States bears a higher risk of moral hazard and a lower incentive for market discipline, and should be considered only under extraordinary circumstances. Therefore, when assessing the objective of minimising reliance on extraordinary public financial support, the Board should find funding through the resolution financing arrangements or the deposit guarantee scheme, preferable to funding through an equal amount of resources from the budget of Member States.