The Council of the EU has now adopted the Bank Recovery and Resolution Directive (the BRRD). Member States have until 31 December 2014 in which to transpose the BRRD into national law.

The BRRD establishes a range of tools to tackle a potential bank crisis. These include that banks should draw up recovery plans and update them annually. National authorities are also required to prepare resolution plans for each bank, laying out the actions they might take if it were to meet the conditions for resolution.

National authorities are also given powers and instruments to resolve a bank in an orderly manner in the event of failure. The main resolution measures include:

  • the sale of (or part of) a business;
  • establishment of a bridge institution (the temporary transfer of good bank assets to a publicly controlled entity);
  • asset separation (the transfer of impaired assets to an asset management vehicle); and
  • bail in measures (the imposition of losses, with an order of seniority, on shareholders and unsecured creditors).

View Council adopts rules on bank recovery and resolution, 6 May 2014