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EU sues six member states for failing to adopt new bank recovery law

BBR Staff Writer Published 23 October 2015

The European Commission is bringing a civil action against six EU member states which failed to implement a law on bank recovery and resolution (BRRD).

ECJ

The commission will refer the Czech Republic, Luxembourg, the Netherlands, Poland, Romania and Sweden to the Court of Justice for failing to transpose the regulation that was introduced to maintain a stable financial system during financial crisis.

The new BRRD rules, adopted in spring 2014, require banks to implement certain recovery plans to overcome financial distress .

The national authorities with certain special powers will be able to intervene to avoid banks or large investment firms in all EU member states from failing during financial distress.

Despite the measures taken, if the banks fail, then the authorities will restructure the banks using necessary tools and powers.

The authorities will also have the powers to implement plans to resolve failed banks that are close to insolvency in a way that preserves their most critical functions and avoids taxpayers having to bail them out.

Commission said: "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."

European Banking Authority has also developed certain technical rules 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.


Image: European Court of Justice in Luxembourg. Photo: courtesy of Cédric Puisney / Wikimedia Commons.