The Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation require that resolution authorities, before taking resolution action or exercising the power to write down or convert relevant capital instruments, ensure that a fair, prudent and realistic valuation of the assets and liabilities of the institution is carried out by a person independent from any public authority, including the resolution authority and the institution.
Last week the Single Resolution Board (SRB) published a framework for valuation (our blog is here).
Following the SRB publication, the European Banking Authority (EBA) has published a Handbook on valuation for purposes of resolution. The Handbook, which is addressed to national and EU resolution authorities, aims at fostering the convergence and consistency of valuation practices as well as the interaction with independent valuers across the EU.
The Handbook provides guidance on the practical steps of the valuation process, on the specific valuation criteria applicable to the various resolution tools and, with a view to facilitating the adoption of an informed decision by the resolution authority, by indicating the content that is expected to be included in the valuation report.