The European parliament has updated its BRRD procedure file, postponing the plenary consideration of the proposal to its 14-17th April session. The regulatory framework has been agreed, however the plenary vote is a very necessary formality. Any further delay would place this cornerstone of EU banking reform perilously close to the 22nd May EU election.
On 22 December 2013 the Council of the EU published a note attaching the final compromise text of the proposed Recovery and Resolution Directive (RRD) agreed with the European Parliament. Agreement in trialogue had previously been reached on 11 December 2013.
On 20 December 2013, the Permament Representatives Committee (COREPER) of the Council of the EU also published a press release confirming that it had approved (on the Council’s behalf) the compromise text agreed with the Parliament. The text of the RRD now needs to be formally adopted by the EU Parliament and the Council.
On 18 April 2013, the EU Council published a press release confirming that agreement had been reached with the EU Parliament on the establishment of the single supervisory mechanism (SSM) with respect to EU credit institutions.
The European Central Bank (ECB) will be responsible for administration of the SSM, but national supervisors will retain responsibility for takes not conferred on the ECB, such as consumer protection, money laundering, payment services and branches of third country banks. The ECB will assume its supervisory role with respect to the SSM either on 1 March 2013 or 12 months after entry into force of the legislation, whichever is later to occur.
The EU Parliament has updated its procedure file on the RRD. It now appears that the first reading of the RRD proposals will take place at the plenary session due to be held between 9 to 12 September 2013. Previously, it had been indicated that the Parliament would consider the RRD at is plenary session scheduled for 10 to 13 June 2013.
On 5 February 2013, the EU Parliament’s Committee on Legal Affairs published a draft opinion proposing certain amendments to the ‘proposal for a directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms’ (the “RRD”). The draft opinion is very short and the proposed amendments most worthy of note are detailed below.
Recital 18 of the RRD currently refers to the ability of less systemically important firms to produce “simplified” resolution plans. The Legal Affairs Committee proposes to amend this reference so that resolution planning is “proportionate” to systemic relevance. However, to date, there appear to be no consequential changes to Article 4 which deals with “simplified” recovery and resolution obligations for less systemically important firms.
Article 5 of the RRD includes an ability for regulators to require institutions to update recovery plans more frequently than annually. In a welcome development, the proposed amendment would only allow this to happen if it were “necessary for the stability of the financial markets” so as to avoid needlessly burdening firms with red tape.
Article 78 of the RRD enables any person affected by a decision of a resolution authority to take a resolution action to apply for judicial review of that decision. However, as currently drafted, notwithstanding the right to apply for judicial review, the actual decision of the resolution authority is “immediately enforceable and shall not be subject to a suspension order issued by a court”. The Committee on Legal Affairs proposes to delete this caveat. The justification for this proposal is that it is not appropriate to restrict a court’s right to suspend resolution actions if breaches of rules are detected. Whilst understandable in principle, the reality is that, by the very nature of resolution itself, one or more parties are always likely to feel aggrieved following the initiation of resolution action. This amendment does not seek to restrict itself to ‘breaches of rules’ and the lack of certainty it would introduce into the resolution process risks creating problems of a higher order than those it seeks to cure.
Last week the EU Parliament published a draft opinion of its Committee on Legal Affairs dated 14 December 2012 regarding the Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms” (the “RRD”).
The proposed amendments contained within the draft opinion do not alter the fundamental principles, or amend the core clauses, of the RRD. Rather they “seek to improve certain inaccuracies and aspects of the proposal drafted by the Commission”. Most noteworthy is the proposed amendment to remove the obligation to conduct an ex-post assessment of whether shareholders and creditors have received treatment no less favourable than would have been the case under normal insolvency proceedings. The EU Parliament has suggested that this assessment only be carried out following a request from such shareholders or creditors.