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.
On 19 February 2019, the Single Resolution Board (SRB) published a framework for valuation. The framework is intended to provide valuers and the general public with an indication of the SRB’s expectations regarding the principles and methodologies for valuation reports as set out in the legal framework.
The SRB considers this document useful for the banks under its remit. The framework describes the characteristics of valuation in resolution. It describes what is expected from the valuer, the characteristics of the valuation report, including explanations of certain assumptions or deviations thereof and the relationship between the implementation of resolution tools and the characteristics of the valuation. A better understanding of the valuation process will also help institutions to crease preparedness for valuation and ultimately their resolvability.