EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 12 September 2014 
on the implementation of the European Bank Recovery and Resolution Directive 
(CON/2014/67) 
 
Introduction and legal basis 
On 25 July 2014, the European Central Bank (ECB) received a request from the German Federal Ministry 
of Finance (hereinafter the ‘Ministry of Finance’) for an opinion on the draft European Bank Recovery and Resolution Directive Implementation Act (hereina fter the ‘draft law’) wh ich transposes Directive 
2014/59/EU of the European Parliament and the Council
1 (hereinafter the ‘BRRD’) into German law. 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and on the third and sixth indents of Article 2(1) of Council Decision 98/415/EC
2, as the draft law relates to the Deutsche Bu ndesbank and to rules applicable to financial 
institutions insofar as they materially influence th e stability of financial institutions and markets. For 
elements of the draft law the exclusive purpose of which is the transposition of Union law, the ECB’s 
competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank (herei nafter the ‘Statute of th e ESCB’). In accordance 
with the first sentence of Article  17.5 of the Rules of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion. 
 1. Purpose of the draft law 
The overall objective of the draft law is to create  a framework for recovery and resolution planning of 
credit institutions and investment firms (hereinafter jo intly referred to as ‘institutions’), and to provide an 
effective mechanism for their resolution, minimising risks to financial stability and costs for public budgets. To this end, the draft law implements the BRRD by putting in place a new Restructuring and Resolution Act covering the restructuring and reso lution of institutions and financial groups and by 
                                                 
1  Directive 2014/59/of the European Parliament and the Council of 15 May 2014 establishing a framework for the recovery 
and resolution of credit institutions and investment firms and amending Council Directive 82/891/EC, and Directives 2001/24/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35 /EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) 
No 1093/2010 and (EU) No 648/2012, of the European Parliament and the Council (OJ L 173, 12.6.2014, p. 190). 
2  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
ECB-PUBLIC 
2 providing for amendments to several legal ac ts, including the Act on a Restructuring Fund3, the Banking 
Act4 and the Act on a Financial Market Stabilisation Fund5. 
In addition, the draft law aims at reflecting cha nges in the distribution of competences in banking 
supervision due to the entry into force of Council Regulation (EU) No 1024/20136 and makes adjustments 
to existing legislation in this field. 
In accordance with Article 25.1 of the Statute of the ESCB, the ECB may be consulted by the competent 
authorities of the Member States on the scope and implementation of Union legislation relating to the 
prudential supervision of credit institutions an d to the stability of the financial system. 
The key provisions of the draft law are set out below. (a) It designates the Federal Agency for Financial Market Stabilisation (FMSA) as the national 
resolution authority, while the Federal Financ ial Supervisory Authority (BaFin) retains its 
supervisory tasks as the national supervisory authorit y. It also facilitates the unobstructed flow of 
information between the FMSA and BaFin in the context of their cooperation, mutual assistance 
and consultation. 
(b) It requires institutions to draw up recovery plans.  However, the supervisory authority may, with the 
agreement of the Deutsche Bundesbank, decide to s ubject institutions to simplified requirements or 
to exempt them from the obligation to draw up  recovery plans altogeth er, subject to certain 
conditions relating to the ins titution’s systemic relevance. 
(c) It empowers the supervisory authority to order early intervention measures in respect of institutions 
in breach or suspected breach of certain prudential requirements. Such measures should be appropriate and necessary in order to improve th e institution’s financial situation where this has 
been subject to rapid deterioration, and are not li mited to those specifically listed in the draft law. 
(d) It provides that the resolution authority shall, in  consultation with the supervisory authority, draw 
up resolution plans for all institutions, but may draw up simplified resolution plans for certain 
institutions taking into account their systemic relevance. 
(e) It lays down requirements and conditions under wh ich institutions may enter into agreements to 
provide financial support to othe r group entities that meet the conditions for early intervention. 
(f) It sets out the conditions for the resolution of in stitutions, allowing both the supervisory and the 
resolution authority, following mutual consultation, to determine whether an institution is failing or 
likely to fail. 
                                                 
3  Act on a Restructuring Fund of 9 December 2010 ( Bundesgesetzblatt I p. 1900, 1921) as amended by Article 3 of the 
Law of 20 December 2012 ( Bundesgesetzblatt  I S. 2777). 
4  Banking Act of 9 September 1998 ( Bundesgesetzblatt  I p. 2776) as amended by Article 1 of the Law of 15 July 2014 
(Bundesgesetzblatt  I p. 934). 
5  Act on a Financial Market Stabilisation Fund of 17 October 2008 ( Bundesgesetzblatt  I p. 1982) as amended by 
Article 6(7) of the Law of 28 August 2013 ( Bundesgesetzblatt  I p. 3395). 
6  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
ECB-PUBLIC 
3 (g) It confers wide-ranging resoluti on powers on the resolution authority and provides for resolution 
tools; in particular the sale of business tool, the bridge institution tool, the asset separation tool and 
the bail-in tool. However, the resolution authority may also take all other measures necessary to 
achieve the resolution objectives.  
(h) It extends the application deadline for new measures under the German Financial Market 
Stabilisation Fund (SoFFin) to the end of 2015 in order to cover the transitional period until the establishment of the Single Resolution Fund in  2016. Since the proposed Restructuring and 
Resolution Act is planned to enter into force on 1 January 2015, the bail-in tool will already apply 
during this transitional period and therefore provid e for the possibility of shareholders and creditors 
being subject to bail-in before state aid is granted through SoFFin. 
(i) It adapts the national provisions  on the definition of a competent authority and the distribution of 
supervisory competences in the light of Counc il Regulation (EU) No 1024/2013. However, the 
explanatory memorandum to the draft law states that  it makes no change to the existing distribution 
of competences between BaFin and the Deutsche Bundesbank. 
The draft law is planned to enter into force on 1 January 2015, with the exception of a number of 
provisions planned to enter into force on the day following its publication. 
 2. General observations  
2.1 The ECB welcomes the draft law, as it strength ens the tools and procedures available to the 
national authorities for effective preventive measures, early intervention in institutions and, if 
necessary, effective resolution of  institutions, in line with the co mmon framework of intervention 
powers and rules laid down in the BRRD. 
2.2 The resolution tools and procedures  will, in particular, help resolve failing banks while preserving 
financial stability, and help shield the public budget from resolution costs. The Ministry of Finance envisages that the provisions rela ting to the bail-in tool will ente r into force on 1 January 2015
7, 
and thus prior to the BRRD’s transposition deadli ne of 1 January 2016. The Ministry of Finance 
thus seeks to ensure, in a timely fashion, that shareholders and creditors instead of public budgets 
will bear losses resulting from resolution.  
2.3 The ECB notes that the draft law provides for cooperation between the competent authority and the 
FMSA in performing their respective tasks, each keeping in mind the impact of its performance on 
that of the other.  
 
3. Specific observations 
3.1 Separation between supervision and resolution functions 
The explanatory memorandum to the draft law states that the FMSA as resolution authority will be 
incorporated into BaFin as supervisory authority as an ‘agency-within-an-agency’ at a later stage. The 
                                                 
7  See Article 8 of the draft law and Part 4 Chapter 2 Section 1 of the proposed Restructuring and Resolution Act. 
ECB-PUBLIC 
4 draft law does not cover the detaile d arrangements relating to this pr ocess, which will be decided on 
separately. 
The BRRD ‘exceptionally’ allows one authority to carr y out both resolution and supervisory functions on 
the condition that adequate structur al arrangements are put in place in order to ensure operational 
independence and to avoid conflicts of  interest between that authority’ s resolution function and its other 
functions. For example, the BRRD envisages struct ural separation being achieved by keeping the 
reporting lines for staff involved in carrying out resolution tasks separate from those used by staff 
involved in supervision activities8. 
Since it is important to ensure the operational i ndependence of the resolution function and to avoid 
conflicts of interests between the resolution function and other functions, the ECB would appreciate being 
consulted on any future draft legal act that sets out detailed arrangements regarding the relationship 
between the FMSA and BaFin fo llowing the FMSA’s integration into the latter authority. 
The draft law allows for the unobstructed flow of information between the two authorities in the 
framework of their cooperation, mutual assistance and consultation9. Such exchange of information is 
also possible between the two author ities and the Deutsche Bu ndesbank, insofar as the latter is involved 
in the supervision of institutions. The ECB welcomes  that this provision ensures that under a future 
regime ensuring the separation of resolution and s upervision functions within the framework of one 
authority, the resolution function will have equal a ccess to any necessary information available to the 
supervisory function, and vice versa. 
3.2 Early intervention, intra-group financial support and recovery plans 
Section 36(4) of the proposed Restructuring and Resolution Act grants the Ministry of Finance the power 
to further specify, by way of a regulation, certain conditions that could trigger the use of early 
intervention measures and to sub-dele gate this power to the resolution authority. Such sub-delegation to 
the resolution authority in the field of early interven tion powers seems inappropriate given that the early 
intervention powers lie with the supervisory authorit y, which would therefore appear best placed to 
specify the relevant trigger cond itions. The explanatory memorandum to  the draft law states that the 
purpose of this provision is to provide for the ability to implement guidelines issued by the European 
Banking Authority (EBA) into German law. The EBA’ s power to issue such guidelines in order to 
promote the consistent application of the trigger for early intervention measures is provided for in 
Article 27(4) of the BRRD. The ECB suggests that the question of which authority should be responsible 
for the implementation of these EBA guidelines should be reconsidered , and that a provision setting out 
the purpose of implementing them should be included in the legislative text itself and not only in the 
explanatory memorandum. The same concerns regardin g an inappropriate empowerment of the resolution 
authority in areas where the supervisory authority is primarily competent arise with respect to the 
conditions on which intra-group fi nancial support may be authorised10.  
                                                 
8  See Article 3(3) of the BRRD. 
9  See Section 6(1) of the proposed Restructuring and Resolution Act. 
10  See Section 30(2) of the proposed Restructuring and Resolution Act. 
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5 In addition, the ECB would like to emphasise that th e competence to issue regulations delegated to the 
Ministry of Finance or another authority regardin g early intervention and recovery plans is without 
prejudice to the ECB’s powers under Article 4(1)(i ) and Article 4(3) of Council Regulation (EU) 
No 1024/2013 to implement EBA guidelines and potentially issue further provisions concerning 
significant institutions in these areas. 
3.3 Resolution planning 
Section 40(2) and (3) of the proposed Restructuring and Resolution Act provide that resolution plans may 
not assume any access to or receipt of extraordin ary public financial support that goes beyond the 
provision of funds as provided for in the Act on the Restructuring Fund, nor any emergency liquidity assistance provided by a central bank or any liquidity  assistance provided by a central bank that is based 
on non-standardised collateral,  maturities or interest rates, but shall include an analysis of how and when 
a distressed institution may apply for the use of ce ntral bank facilities. While acknowledging that these 
provisions are in line with the requirements of the BRRD, the ECB emphasises that they do not in any 
way affect the competence of central banks to deci de independently and at their full discretion on the 
provision of central bank liquidity to solvent in stitutions, both through standard monetary policy 
operations and in emergency liquidity assistance, within the limits imposed by the monetary financing 
prohibition under the Treaty
11. 
3.4 Conditions for resolution 
The ECB notes that the Ministry of Finance has made use of the possibility provided for in the BRRD to 
allow both the supervisory authority or the resolu tion authority, following mutual consultation, to 
determine whether an institution is failing or likely to fail12.  
3.5 Amendments to the Banking Act 
3.5.1 Definition of competent authority 
By inserting a new Section 1(5) into the Banking Act, the draft law introdu ces a new definition of 
‘competent authority’ in the light of Council Regulation (EU) No 1024/201313. However, subparagraph 1 
of the new Section 1(5), which outlines the scope of the ECB’s competence, only includes the ECB’s 
tasks under Article 4(1) of Council Regulation (EU)  No 1024/2013 and omits those conferred on it under 
Article 4(2). This provision therefore requires amendm ent in order to fully reflect the tasks conferred on 
the ECB by Council Regulation (EU) No 1024/2013.  
3.5.2 Distribution of national competences within the Single Supervisory Mechanism 
The ECB understands that the existing distribution of competences and tasks between BaFin and the 
Deutsche Bundesbank provided for in Section 7(1) of  the Banking Act will continue to apply within the 
framework of the Single Supervis ory Mechanism (SSM) wh ere the national authorities will cooperate 
with and assist the ECB under Council Regulation (EU) No 1024/201314. The ECB notes, however, that 
                                                 
11  See paragraph 3.2 of Opinion CON/2012/99. All ECB opinio ns are available on the ECB website at www.ecb.europa.eu. 
12  See Section 62(2) of the proposed Restructuring and Resolution Act. 
13  See Article 2 (2) of the draft law. 
14  See the explanatory memorandum to the draft law rela ting to the new Section 7(1a) of the Banking Act.  
ECB-PUBLIC 
6 the proposed wording of the new Section 7(1a) of the Banking Act is ambiguous in this respect, as it only 
refers to BaFin’s direct support of the ECB within the framework of the SSM, without reflecting the 
Deutsche Bundesbank’s competence in relation to th e ongoing monitoring of institutions. In accordance 
with Article 2(9) of Regulation (EU) No 468/2014 of the European Central Bank15, the ECB will interact 
and cooperate directly with the Deutsche Bundesbank in its field of supervisory responsibility. For the sake of legal certainty and since the close involvement  of national central banks in prudential supervision 
is a condition for the Eurosystem to  contribute effectively to monitori ng the risks to financial stability in 
the euro area, the ECB therefore suggests that th e proposed Section 7(1a) of the Banking Act should 
clarify that the competences laid down in Section 7( 1) of the Banking Act also apply with regard to 
significant credit institutions subject to the ECB’s dire ct supervision pursuant to Council Regulation (EU) 
No 1024/2013. Cooperation and the distribution of tasks within the SSM need to be clearly regulated to 
ensure efficient cooperation and timely exchange of relevant information among the authorities involved 
in banking supervision. This will support the effectiv e performance of their tasks and thereby contribute 
to the smooth functioning of the SSM.  
3.5.3 Notifications by significant institutions 
The draft law amends Sections 24 and 24a of the Ba nking Act and requires institutions under the ECB’s 
direct supervision to submit notifications directly to the ECB and provide copies of such notifications to the Deutsche Bundesbank and BaFin at the same time. The explanatory memorandum to the draft law justifies this amendment on the basis of the need to bring the provisions in line with Article 95(1) of 
Regulation (EU) No 468/2014. While it is correct that  Article 95(1) requires, as a general rule, that 
significant institutions should address notifications directly to the ECB, the Regulation also contains exceptions to this rule. For example, notificati ons relating to the suitability of members of the 
management bodies of significant institutions must be made to national supervisory authority and not to 
the ECB
16. Moreover, it should also be noted that the provisions of Regulation (EU) No 468/2014 
generally also oblige the receiving authority to info rm the other relevant authority. The ECB therefore 
sees a need for the national law to accurately re flect the provisions laid down in Regulation (EU) 
No 468/2014 for the sake of legal clarity and to avoid any duplication or additional burden on institutions. 
 
This opinion will be published on the ECB’s website.  
Done at Frankfurt am Main, 12 September 2014. 
[signed] 
The President of the ECB 
Mario DRAGHI 
                                                 
15  Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for cooperation 
within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and 
with national designated authorities (SSM Framework Regulation) (OJ L 141, 14.05.2014, p. 1). 
16  Articles 93 and 94 of Regulation (EU) No. 648/2014.