European Union will improve bank dissolution

The Ministers of Economy and Finance (Ecofin) gave the green light to the prudential regulatory framework for credit institutions operating in the European Union, to improve the bank dissolution process and help ensure that these entities remain resilient and capable of resisting disturbances.

“With the new rules we have adopted today we will ensure that we have stable and resilient banks without imposing a significant increase in capital requirements,” Czech Finance Minister Zbynek Stanjura said.

The revision of the bank resolution framework aims to better ensure that loss absorption and recapitalization of banks is carried out through private means when these entities become financially unviable and are dissolved.

The support for this regulation in the Council is the last step in the process of adopting this regulation in the EU, after the Council set its negotiating position in December last year and the European Parliament did the same in February this year the trilogies between the co-legislators.

The rule, dubbed Daisy Chain, reforms the banking regulatory framework to incorporate a specific treatment for the indirect subscription of eligible instruments for the purposes of the minimum requirement of eligible passive own funds.

In addition, it incorporates greater harmonization of the treatment of groups of institutions of global systemic importance with a resolution strategy based on multiple activation with the detailed treatment in the international term sheet regarding the total loss absorption capacity and clarifies the admissibility of the introduced instruments.

K. Tovar

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Source: Pressdigital