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Bank Recovery and Resolution: Commission calls on 9 Member States to communicate national measures transposing EU rules on loss-absorbing and recapitalisation capacity

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The Commission decided to address reasoned opinions to Belgium, Czechia, Italy, Lithuania, Latvia, the Netherlands, Poland, Portugal and Romania for failing to transpose the revised EU rules on bank recovery and resolution into their national law (Directive (EU) 2019/879), namely the Bank Recovery and Resolution Directive II (BRRD II).

 

This Directive implements the standard on Total Loss-Absorbing Capacity (TLAC) for global systemically important banks adopted by the Financial Stability Board (FSB) and enhances the application of the minimum requirement for own funds and eligible liabilities (MREL) for all banks.

 

The new rules better ensure that banks build up robust and sufficient loss-absorbing and recapitalisation capacity so that, in case a bank fails, their losses are borne by banks' shareholders and creditors and not financed by taxpayers' money.

 

This contributes to strengthening the resilience of the European banking system as well to maintain financial stability, in addition to increasing market confidence. BRRD II also ensures that retail investors do not invest excessively in debt instruments (such as bonds) that are eligible for MREL and thus would be used first to absorb the losses of the bank.

 

Member States had to transpose the Directive and communicate national transposition measures to the Commission by 28 December 2020. The Commission sent letters of formal notice in February 2021 requesting the concerned Member States to notify full transposition measures. Due to the failure to notify any transposition measures, the Commission has decided to continue the infringement procedures by sending them reasoned opinions.

 

The concerned Member States have now two months to take the necessary measures to transpose the BRRDII, otherwise the Commission may decide to refer the cases to the Court of Justice of the European Union.

 

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