This Directive (2014/59/EU) is a centre-piece of the regulatory framework that was put in place to create a safer and sounder financial sector in the wake of the financial crisis. It is also important for the EU's Banking Union. The new BRRD rules equip national authorities with the necessary tools and powers to mitigate and manage the distress or failure of banks or large investment firms in all EU Member States. The objective is to ensure that banks on the verge of insolvency can be restructured without taxpayers having to pay for failing banks to safeguard financial stability. To this end, they provide inter alia for shareholders and creditors of the banks to pay their share of the costs through a "bail-in" mechanism. It is crucially important that such rules are in place in all Member States. The deadline for the transposition of these rules into national law was 31 December 2014 (IP/14/2862).
The Commission sent a reasoned opinion to 11 EU Member States on 28 May 2015 (IP/15/5057), asking them to transpose the BRRD. As full transposition of the new rules did not occur in six EU Member States, they are now being referred to the Court.
Referrals to the Court imply the imposition of, at least, a daily penalty payment until full transposition has taken place. The amount of such penalties are calculated in a way that takes into account the payment capacity, the duration and degree of seriousness of the infringement of the Member State concerned. The Commission can decide to withdraw this case in the event that a Member State implements the EU rules in question.
Since 2008, the European Commission has adopted a number of measures to ensure the stability of financial and banking services. The Bank Recovery and Resolution Directive (BRRD) was adopted in Spring 2014 to provide authorities with comprehensive and effective arrangements to deal with failing banks as well as cooperation arrangements to tackle cross-border banking failures (IP/12/570). For Member States which are part of the Euro area or participate in the Banking Union, transposition of the BRRD is indispensable for the Single Resolution Mechanism to function, as in many cases decisions of the Single Resolution Board must be implemented based on national law transposing the BRRD.
Under BRRD, banks are required to prepare recovery plans to overcome financial distress. Authorities are also granted a set of powers to intervene in the operations of banks to avoid them failing. If they do face failure, authorities are equipped with comprehensive powers and tools to restructure them, allocating losses to shareholders and creditors following a clearly defined hierarchy. They have the powers to implement plans to resolve failed banks in a way that preserves their most critical functions and avoids taxpayers having to bail them out.
There are precise arrangements setting out how home and host authorities of banking groups should cooperate in all stages of cross-border resolution, from resolution planning to resolution itself, with a strong role for the European Banking Authority to coordinate and mediate in case of disagreements.
National resolution funds are also being established. In the case of euro area Member States, these funds will be replaced by the Single Resolution Fund as of 2016.
The BRRD is being further complemented by technical rules developed by the European Banking Authority on a number of subjects, including concrete information requirements for recovery and resolution plans and securing accurate valuations of assets and losses at the point of resolution.
On the decisions of the October 2015 infringements package: MEMO/15/5826
On the general infringement procedure, see MEMO/12/12
For more information on infringement procedures: