# Official Journal C 26/24 J

| | ISSN 1977-091X |
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| Official Journal
  of the European Union | C 26 |
| | |
| English edition | Information and Notices | Volume 6124 January 2018 |

ISSN 1977-091X

Official Journal

of the European Union

C 26

English edition

Information and Notices

Volume 6124 January 2018

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| Notice No | Contents | page |
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| | IV   Notices |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES |
| | Court of Auditors |
| 2018/C 26/01 | Report pursuant to Article 92(4) of Regulation (EU) No 806/2014 on any contingent liabilities (whether for the Single Resolution Board, the Council, the Commission or otherwise) arising as a result of the performance by the Single Resolution Board, the Council and the Commission of their tasks under this Regulation for the financial year 2016, together with the replies of the Single Resolution Board, the Council and the Commission | 1 |

Notice No

Contents

page

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

2018/C 26/01

Report pursuant to Article 92(4) of Regulation (EU) No 806/2014 on any contingent liabilities (whether for the Single Resolution Board, the Council, the Commission or otherwise) arising as a result of the performance by the Single Resolution Board, the Council and the Commission of their tasks under this Regulation for the financial year 2016, together with the replies of the Single Resolution Board, the Council and the Commission

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| EN | |
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EN

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IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

| 24.1.2018 | EN | Official Journal of the European Union | C 26/1 |
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24.1.2018

EN

Official Journal of the European Union

C 26/1

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Report pursuant to Article 92(4) of Regulation (EU) No 806/2014 on any contingent liabilities (whether for the Single Resolution Board, the Council, the Commission or otherwise) arising as a result of the performance by the Single Resolution Board, the Council and the Commission of their tasks under this Regulation for the financial year 2016, together with the replies of the Single Resolution Board, the Council and the Commission

(2018/C 026/01)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| Abbreviations | | 2 |
| Introduction | 1 - 4 | 3 |
| Audit scope and approach | 5 - 8 | 3 |
| | Audit scope | 5 | 3 |
| | Audit approach | 6 - 8 | 3 |
| Observations | 9 - 30 | 4 |
| | Contingent liabilities of the SRB | 9 - 22 | 4 |
| | Contingent liabilities of the Commission | 23 - 26 | 6 |
| | Contingent liabilities of the Council | 27 - 30 | 7 |
| Conclusions and recommendations | 31 - 33 | 7 |

Paragraph

Page

Abbreviations

2

Introduction

1 - 4

3

Audit scope and approach

5 - 8

3

Audit scope

5

3

Audit approach

6 - 8

3

Observations

9 - 30

4

Contingent liabilities of the SRB

9 - 22

4

Contingent liabilities of the Commission

23 - 26

6

Contingent liabilities of the Council

27 - 30

7

Conclusions and recommendations

31 - 33

7

ABBREVIATIONS

| CJEU | Court of Justice of the European Union |
| --- | --- |
| NRA | National Resolution Authority |
| SRB | Single Resolution Board |
| SRF | Single Resolution Fund |
| SRM | Single Resolution Mechanism |
| SRM Regulation | Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1) |

CJEU

Court of Justice of the European Union

NRA

National Resolution Authority

SRB

Single Resolution Board

SRF

Single Resolution Fund

SRM

Single Resolution Mechanism

SRM Regulation

Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1)

INTRODUCTION

| 1. | The Single Resolution Mechanism (SRM), established by Regulation (EU) No 806/2014 (SRM Regulation) (1), is the second pillar of the EU’s banking union. When banks fail, the mechanism aims to manage their resolution effectively through the Single Resolution Board (SRB), if necessary with the use of the Single Resolution Fund (SRF). The SRF is fully financed by the banking sector. |
| --- | --- |

1.

The Single Resolution Mechanism (SRM), established by Regulation (EU) No 806/2014 (SRM Regulation) (1), is the second pillar of the EU’s banking union. When banks fail, the mechanism aims to manage their resolution effectively through the Single Resolution Board (SRB), if necessary with the use of the Single Resolution Fund (SRF). The SRF is fully financed by the banking sector.

| 2. | The SRB is the resolution authority for all the significant banks (2) and less significant cross-border banking groups established in the euro area (3). Its mission is to ensure an orderly resolution of failing banks with minimum impact on the real economy and on public finances. The SRB became an independent agency as of 1 January 2015 and has been fully operational, with a complete set of resolution powers, since 1 January 2016. |
| --- | --- |

2.

The SRB is the resolution authority for all the significant banks (2) and less significant cross-border banking groups established in the euro area (3). Its mission is to ensure an orderly resolution of failing banks with minimum impact on the real economy and on public finances. The SRB became an independent agency as of 1 January 2015 and has been fully operational, with a complete set of resolution powers, since 1 January 2016.

| 3. | The decision to place an entity under resolution involves the European Central Bank, the SRB, the Commission and, possibly, the Council (4). |
| --- | --- |

3.

The decision to place an entity under resolution involves the European Central Bank, the SRB, the Commission and, possibly, the Council (4).

| 4. | The SRM Regulation provides in Article 92(4) that the Court shall prepare a report, in particular, on any contingent liabilities (whether for the SRB, the Council, the Commission or otherwise) arising as a result of the performance by the SRB, the Council and the Commission of their tasks under this Regulation. |
| --- | --- |

4.

The SRM Regulation provides in Article 92(4) that the Court shall prepare a report, in particular, on any contingent liabilities (whether for the SRB, the Council, the Commission or otherwise) arising as a result of the performance by the SRB, the Council and the Commission of their tasks under this Regulation.

AUDIT SCOPE AND APPROACH

Audit scope

| 5. | The audit dealt with the contingent liabilities referred to in Article 92(4) of the SRM Regulation and covered the financial year 2016. |
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5.

The audit dealt with the contingent liabilities referred to in Article 92(4) of the SRM Regulation and covered the financial year 2016.

Audit approach

| 6. | Contingent liabilities are to be disclosed in the annual accounts as defined in EU Accounting Rule 10 — Provisions, contingent assets and contingent liabilities (see Box 1).






  Box 1 — Definition of a contingent liability

  A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the European Union; or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability. |
| --- | --- |

6.

Contingent liabilities are to be disclosed in the annual accounts as defined in EU Accounting Rule 10 — Provisions, contingent assets and contingent liabilities (see Box 1).

Box 1 — Definition of a contingent liability

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the European Union; or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability.

| 7. | The Court audited the annual accounts of the Commission and of the Council for the financial year 2016 in the context of its Annual Report work. The annual accounts of the SRB for the financial year 2016 were audited by an independent external auditor and the result of this work was taken into consideration in the Court’s opinion on their reliability (5). |
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7.

The Court audited the annual accounts of the Commission and of the Council for the financial year 2016 in the context of its Annual Report work. The annual accounts of the SRB for the financial year 2016 were audited by an independent external auditor and the result of this work was taken into consideration in the Court’s opinion on their reliability (5).

| 8. | Further audit evidence consists of information gathered through meetings and interviews with staff, as well as the review of internal documentation or publicly available data. |
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8.

Further audit evidence consists of information gathered through meetings and interviews with staff, as well as the review of internal documentation or publicly available data.

OBSERVATIONS

Contingent liabilities of the SRB

| 9. | The accounting officer of the SRB confirmed in a representation letter covering the annual accounts for the financial year 2016 that all contingent liabilities referred to in Article 92(4) of the SRM Regulation had been disclosed. |
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9.

The accounting officer of the SRB confirmed in a representation letter covering the annual accounts for the financial year 2016 that all contingent liabilities referred to in Article 92(4) of the SRM Regulation had been disclosed.

| 10. | The Court has issued an unqualified opinion on the reliability of the annual accounts of the SRB for the financial year 2016 (6). |
| --- | --- |

10.

The Court has issued an unqualified opinion on the reliability of the annual accounts of the SRB for the financial year 2016 (6).

| 11. | With regard to contingent liabilities the SRB is in the process of developing an accounting guidance which is intended to be finalised by year end 2017. |
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11.

With regard to contingent liabilities the SRB is in the process of developing an accounting guidance which is intended to be finalised by year end 2017.

| 12. | Apart from the Excel spreadsheets referred to paragraph 18, the SRB has no IT system to assist in the accounting of contingent liabilities which would enable it to implement standardised reporting and accounting documentation as well as standardised assessment. |
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12.

Apart from the Excel spreadsheets referred to paragraph 18, the SRB has no IT system to assist in the accounting of contingent liabilities which would enable it to implement standardised reporting and accounting documentation as well as standardised assessment.

| 13. | The upcoming legal proceedings (see paragraphs 17 and 21) against the SRB and the National Resolution Authorities (NRAs) will negatively impact their financial resources (e.g. expenses for legal advice) and HR resources (e.g. additional legal staff), costs which will directly be borne by these authorities and indirectly by all banks via their contributions. |
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13.

The upcoming legal proceedings (see paragraphs 17 and 21) against the SRB and the National Resolution Authorities (NRAs) will negatively impact their financial resources (e.g. expenses for legal advice) and HR resources (e.g. additional legal staff), costs which will directly be borne by these authorities and indirectly by all banks via their contributions.

Contingent liabilities related to bank’s contributions to the Single Resolution Fund

| 14. | The banks in the euro area are required to contribute to the SRB. Their contributions for the year 2015 were calculated and collected by the NRAs and finally transferred to the SRB in January 2016. Contributions for the year 2016 were calculated by the SRB. The methodology for the calculation is complex (7). The 2016 contributions were raised by the NRAs based on the SRB’s calculations and transferred in June 2016 to the SRB (8). |
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14.

The banks in the euro area are required to contribute to the SRB. Their contributions for the year 2015 were calculated and collected by the NRAs and finally transferred to the SRB in January 2016. Contributions for the year 2016 were calculated by the SRB. The methodology for the calculation is complex (7). The 2016 contributions were raised by the NRAs based on the SRB’s calculations and transferred in June 2016 to the SRB (8).

| 15. | The annual target level is the total fixed contribution amount which is levied from the banks per each year. |
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15.

The annual target level is the total fixed contribution amount which is levied from the banks per each year.

| 16. | In total the NRAs collected 10,7 billion euro of contributions for 2015 and 2016 and transferred them to the SRF which is owned by the SRB. |
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16.

In total the NRAs collected 10,7 billion euro of contributions for 2015 and 2016 and transferred them to the SRF which is owned by the SRB.

| 17. | In its 2016 final annual accounts the SRB disclosed contingent liabilities amounting to 841 826 146 euro related to ex ante contributions. Thereof an amount of 800 791 513 euro relates to appeals with NRAs and court cases before administrative Member State courts, which were determined based on NRA declarations. Tables 1 and 2 below show the details and development of these amounts and number of appeals and court cases up to 30 September 2017:

  Table 1


  Development of the disputed amounts of contingent liabilities arising from ex ante contributions to the SRF









  Contingent liabilities from amounts in dispute in euro | 30.9.2017 | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- | --- |
| — | Appeals with NRAs and cases before administrative courts of the Member States |

17.

In its 2016 final annual accounts the SRB disclosed contingent liabilities amounting to 841 826 146 euro related to ex ante contributions. Thereof an amount of 800 791 513 euro relates to appeals with NRAs and court cases before administrative Member State courts, which were determined based on NRA declarations. Tables 1 and 2 below show the details and development of these amounts and number of appeals and court cases up to 30 September 2017:

Table 1

Development of the disputed amounts of contingent liabilities arising from ex ante contributions to the SRF

Contingent liabilities from amounts in dispute in euro

30.9.2017

31.12.2016

31.12.2015

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Appeals with NRAs and cases before administrative courts of the Member States

1 240 045 681

800 791 513

437 125 144

Related to 2015 ex ante contributions

84 149 051

84 149 051

437 125 144

Related to 2016 ex ante contributions

596 809 613

716 642 462

0

Related to 2017 ex ante contributions

559 087 017

0

0

| — | Legal cases before the General Court of the CJEU |
| --- | --- |

—

Legal cases before the General Court of the CJEU

180 197 774

41 034 633

0

Related to 2016 ex ante contributions

115 676 910

41 034 633

0

Related to 2017 ex ante contributions

64 520 864

0

0

Total

1 420 243 455

841 826 146

437 125 144

Source: ECA based on SRB data.

Table 2

Development of appeals and number of cases arising from ex ante contributions to the SRF

| Number of appeals, court cases and legal cases | 30.9.2017 | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- |
| — | Appeals with NRAs and cases before administrative courts of the Member States |

Number of appeals, court cases and legal cases

30.9.2017

31.12.2016

31.12.2015

—

Appeals with NRAs and cases before administrative courts of the Member States

394

261

67

Related to 2015 ex ante contributions

7

6

67

Related to 2016 ex ante contributions

256

255

0

Related to 2017 ex ante contributions

131

0

0

| — | Legal cases before the General Court of the CJEU |
| --- | --- |

—

Legal cases before the General Court of the CJEU

13

9

0

Related to 2016 ex ante contributions

10

9

0

Related to 2017 ex ante contributions

3

0

0

Total

407

270

67

Source: ECA based on SRB data.

| 18. | With regard to the underlying process for the 2016 final annual accounts, it must be noted that the NRAs submitted their respective declarations in aggregated amounts only. This means that there was no itemisation. The process has been improved as of September 2017 when NRAs started delivering individual details in Excel spreadsheets. The improved process revealed that amounts in dispute for appeals against NRAs and cases before administrative courts of Member States related to 2016 contributions had been overstated by approximately 120 million euro. In addition the SRB did not provision for legal costs related to appeals and court cases in its 2016 final annual accounts (e.g. expenses for legal advice). However the impact discussed in this paragraph is not material for the final annual accounts 2016. |
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18.

With regard to the underlying process for the 2016 final annual accounts, it must be noted that the NRAs submitted their respective declarations in aggregated amounts only. This means that there was no itemisation. The process has been improved as of September 2017 when NRAs started delivering individual details in Excel spreadsheets. The improved process revealed that amounts in dispute for appeals against NRAs and cases before administrative courts of Member States related to 2016 contributions had been overstated by approximately 120 million euro. In addition the SRB did not provision for legal costs related to appeals and court cases in its 2016 final annual accounts (e.g. expenses for legal advice). However the impact discussed in this paragraph is not material for the final annual accounts 2016.

| 19. | In its report on the 2016 Final Annual Accounts the independent external auditor recommended that for future years the SRB should review and enhance its procedures for collating financial data on administrative appeals against NRAs and on court cases before the administrative courts of the relevant Member States to ensure that sufficient financial and non-financial information is provided by the NRAs. |
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19.

In its report on the 2016 Final Annual Accounts the independent external auditor recommended that for future years the SRB should review and enhance its procedures for collating financial data on administrative appeals against NRAs and on court cases before the administrative courts of the relevant Member States to ensure that sufficient financial and non-financial information is provided by the NRAs.

Contingent liabilities related to a resolution

| 20. | No bank resolutions were initiated by the SRB in the reporting period up to 31 December 2016 and no contingent liability was to be disclosed in relation to resolution decisions for the financial year 2016. The first resolution decision was taken on 7 June 2017 (9). Contingent liabilities arising from it did not need to be disclosed in the SRB’s final accounts for 2016 as they are related to a 2017 financial year event and appeared only after the accounts were authorised for issue (10). The SRB described the taking of the resolution decision as a non-adjusting event (11) in its 2016 final annual accounts (12). |
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20.

No bank resolutions were initiated by the SRB in the reporting period up to 31 December 2016 and no contingent liability was to be disclosed in relation to resolution decisions for the financial year 2016. The first resolution decision was taken on 7 June 2017 (9). Contingent liabilities arising from it did not need to be disclosed in the SRB’s final accounts for 2016 as they are related to a 2017 financial year event and appeared only after the accounts were authorised for issue (10). The SRB described the taking of the resolution decision as a non-adjusting event (11) in its 2016 final annual accounts (12).

| 21. | It should be noted that, a number of law suits have been filed with regard to this first resolution decision. In addition, a significant number of administrative appeals have been filed with regard to that resolution. In detail there are:






  (a) | 90 legal cases against the SRB before the General Court of the Court of Justice of the European Union (CJEU) filed by 12 October 2017; |
| --- | --- | --- |

21.

It should be noted that, a number of law suits have been filed with regard to this first resolution decision. In addition, a significant number of administrative appeals have been filed with regard to that resolution. In detail there are:

(a)

90 legal cases against the SRB before the General Court of the Court of Justice of the European Union (CJEU) filed by 12 October 2017;

| (b) | 46 appeals submitted to SRB’s appeal panel by 26 October 2017 (13). |
| --- | --- |

(b)

46 appeals submitted to SRB’s appeal panel by 26 October 2017 (13).

| 22. | The related contingent liabilities will be subject to our report of the financial year 2017. |
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22.

The related contingent liabilities will be subject to our report of the financial year 2017.

Contingent liabilities of the Commission

| 23. | The Commission confirmed that at 31 December 2016 there were no contingent liabilities arising due to the SRM Regulation (Article 92(4)). |
| --- | --- |

23.

The Commission confirmed that at 31 December 2016 there were no contingent liabilities arising due to the SRM Regulation (Article 92(4)).

| 24. | The Court has issued an unqualified opinion on the reliability of the consolidated accounts of the European Union for the financial year 2016 (14). |
| --- | --- |

24.

The Court has issued an unqualified opinion on the reliability of the consolidated accounts of the European Union for the financial year 2016 (14).

| 25. | It should be noted that with regard to the endorsement of the first resolution decision (15), on the 7 June 2017 the Commission has been notified of 26 legal cases brought before the General Court of the CJEU against the Commission. Contingent liabilities arising from it did not need to be disclosed in the Commission’s final accounts for 2016 as they are related to a 2017 financial year event and appeared only after the accounts were authorised for issue. |
| --- | --- |

25.

It should be noted that with regard to the endorsement of the first resolution decision (15), on the 7 June 2017 the Commission has been notified of 26 legal cases brought before the General Court of the CJEU against the Commission. Contingent liabilities arising from it did not need to be disclosed in the Commission’s final accounts for 2016 as they are related to a 2017 financial year event and appeared only after the accounts were authorised for issue.

| 26. | The related contingent liabilities will be subject to our report of the financial year 2017. |
| --- | --- |

26.

The related contingent liabilities will be subject to our report of the financial year 2017.

Contingent liabilities of the Council

| 27. | The accountant officer of the Council stated in a representation letter dated 30 May 2017 that at 31 December 2016 there were no contingent liabilities arising due to the SRM Regulation (Article 92(4)). |
| --- | --- |

27.

The accountant officer of the Council stated in a representation letter dated 30 May 2017 that at 31 December 2016 there were no contingent liabilities arising due to the SRM Regulation (Article 92(4)).

| 28. | The Court has issued an unqualified opinion on the reliability of the consolidated accounts of the European Union for the financial year 2016 (16). |
| --- | --- |

28.

The Court has issued an unqualified opinion on the reliability of the consolidated accounts of the European Union for the financial year 2016 (16).

| 29. | The Council was not involved in the resolution decision mentioned in paragraphs 20 and 25 but as of 26 October 2017 it was subject to one legal case brought before the General Court of the CJEU arising thereof. A contingent liability did not need to be disclosed in the Council’s final accounts for 2016 as it is related to a 2017 financial year event and appeared only after the accounts were authorised for issue. |
| --- | --- |

29.

The Council was not involved in the resolution decision mentioned in paragraphs 20 and 25 but as of 26 October 2017 it was subject to one legal case brought before the General Court of the CJEU arising thereof. A contingent liability did not need to be disclosed in the Council’s final accounts for 2016 as it is related to a 2017 financial year event and appeared only after the accounts were authorised for issue.

| 30. | The related contingent liability will be subject to our report of the financial year 2017. |
| --- | --- |

30.

The related contingent liability will be subject to our report of the financial year 2017.

CONCLUSIONS AND RECOMMENDATIONS

| 31. | The contingent liabilities at SRB level for the financial year 2016 increased significantly compared to the financial year 2015. This increase is attributed to bank appeals and court cases related to ex ante contributions. It can already be predicted at this stage of the year that the increase will continue in the financial year 2017 due to the appeals against the resolution decision taken and the appeals by banks and court cases taken in relation to the ex ante contributions (see paragraphs 17, 21, 25 and 29). |
| --- | --- |

31.

The contingent liabilities at SRB level for the financial year 2016 increased significantly compared to the financial year 2015. This increase is attributed to bank appeals and court cases related to ex ante contributions. It can already be predicted at this stage of the year that the increase will continue in the financial year 2017 due to the appeals against the resolution decision taken and the appeals by banks and court cases taken in relation to the ex ante contributions (see paragraphs 17, 21, 25 and 29).

| 32. | The SRB has not yet established a detailed accounting guidance (see paragraphs 11). The SRB did not make a provision for legal costs in its 2016 final annual accounts (see paragraph 18).






  Recommendation 1

  Due to the increase in the number of contingent liability cases and their complexity the SRB should establish a detailed accounting guidance. The accounting guidance should also deal with the provisioning of legal costs.

  Target implementation date: end of 2017 |
| --- | --- |

32.

The SRB has not yet established a detailed accounting guidance (see paragraphs 11). The SRB did not make a provision for legal costs in its 2016 final annual accounts (see paragraph 18).

Recommendation 1

Due to the increase in the number of contingent liability cases and their complexity the SRB should establish a detailed accounting guidance. The accounting guidance should also deal with the provisioning of legal costs.

Target implementation date: end of 2017

| 33. | The process weakness in relation to the contingent liabilities led to an overstatement, which was not material for SRB’s 2016 final annual accounts. The SRB’s process has improved throughout 2017 (see paragraph 18). However, the SRB has no IT system in place for standardised reporting, accounting documentation and assessment (see paragraph 12).






  Recommendation 2

  The SRB should introduce a suitable process including an IT system which will ensure that all kinds of contingent liabilities are properly accounted for and reported. The NRAs should have access to this IT system to record the contingent liabilities accordingly.

  Target implementation date: end of 2019 |
| --- | --- |

33.

The process weakness in relation to the contingent liabilities led to an overstatement, which was not material for SRB’s 2016 final annual accounts. The SRB’s process has improved throughout 2017 (see paragraph 18). However, the SRB has no IT system in place for standardised reporting, accounting documentation and assessment (see paragraph 12).

Recommendation 2

The SRB should introduce a suitable process including an IT system which will ensure that all kinds of contingent liabilities are properly accounted for and reported. The NRAs should have access to this IT system to record the contingent liabilities accordingly.

Target implementation date: end of 2019

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 12 December 2017.

For the Court of Auditors

Klaus-Heiner LEHNE

President

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(1)  Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1).

1

(2)  The term ‘bank’ in this report refers to the entities named in Article 2 of the SRM Regulation.

2

(3)  A list of banks for which the SRB is the resolution authority can be found here https://srb.europa.eu/en/node/44

3

(4)  Article 18 of SRM Regulation.

4

(5)  More information on the Court’s audit approach is presented in its Annual Report on the implementation of the budget concerning the financial year 2016 and in its report on the annual accounts of the Single Resolution Board for the financial year 2016.

5

(6)  Report on the annual accounts of the Single Resolution Board for the financial year 2016.

6

(7)  https://srb.europa.eu/en/content/ex-ante-contributions-0

7

(8)  Legal basis is the Intergovernmental Agreement on the transfer and mutualisation of contributions to the Single Resolution Fund (IGA) http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%208457%202014%20INIT

8

(9)  Resolution decision concerning Banco Popular Español, SA. https://srb.europa.eu/en/content/banco-popular

9

(10)  The first application contesting the resolution decision in respect of Banco Popular before the CJEU was served to the SRB on 8 August 2017.

10

(11)  No 7 and 13 of EU Accounting Rule 19. A non-adjusting event shall not impact the amounts recorded or disclosed for the current financial year. If the non-adjusting event is material it needs to be described if non-disclosure could influence the economic decisions of users of the annual accounts.

11

(12)  Page 38 of the SRB’s 2016 final annual accounts.

12

(13)  There are further 101 lawsuits before the Audiencia Nacional (Spanish national administrative court) and 108 administrative appeals brought to the Fondo de Restructuración Ordenada Bancaria (Spanish NRA) as of 6 October 2017. In these cases Spanish authorities are the defendant.

13

(14)  Court’s Annual Report on the implementation of the budget concerning the financial year 2016.

14

(15)  Endorsement of the resolution decision concerning Banco Popular Español, SA http://europa.eu/rapid/press-release_IP-17-1556_en.htm

15

(16)  Court’s Annual Report on the implementation of the budget concerning the financial year 2016.

16

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THE SINGLE RESOLUTION BOARD REPLIES

Recommendation 1

Accepted: the SRB agrees with the remark of the ECA and, already in 2017, action will be taken in this respect by developing an accounting guidance for provisioning legal costs and recognition of contingent liabilities (expected to be implemented by Q1 2018).

Recommendation 2

Partially accepted: the SRB has agreed already with the NRAs on an improved procedure involving regular reporting that allows the SRB to monitor the evolution of appeals over time. The SRB has no legal basis to enforce on the NRAs the use of a specific IT tool. Nonetheless, the SRB will strive, to the extent possible in cooperation with the NRAs, to enhance the existing reporting procedure in order to provide for more transparency as regards indication on number of overall cases, the amounts involved, including possible pay outs of remedies stemming from the national proceedings. It shall be noted that the appeal cases are handled by the NRAs on a continuous basis and thus, the amount of the contingent liabilities changes over time. Therefore, the SRB relies on NRAs’ input as it has no direct access to this information.

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THE COUNCIL’S REPLY

As no contingent liabilities pursuant to Article 92(4) of the SRM regulation were recorded in the accounts related to the Council in the financial reporting year 2016, there are no comments from this institution.

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THE COMMISSION’S REPLY

The Commission has taken note of the report of the European Court of Auditors.

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