THE SINGLE RESOLUTION BOARD REPLIES

Paragraphs 19-20

The disclosure of information regarding the court cases brought against the SRB before the Court of Justice of the European Union following the resolution of Banco Popular Español S.A. (BPE) in the Section of 2017 Annual Accounts, titled ‘Additional information related to legal cases’ was made merely for reasons of transparency, without the intention to recognise and report contingent liabilities arising from those cases. On the basis of the SRB’s assessment after the adoption of the 2017 Annual Accounts, the SRB would like to note that the outflow of resources as a result of these cases is considered remote.

In particular, the SRB notes that the majority of the above court cases are actions seeking the annulment of the SRB’s resolution decision adopted in respect of BPE. The SRB considers that these actions for annulment cannot lead to a direct outflow of resources from the SRB’s budget, except for possible litigation costs (with regard to the litigation costs, see comment under paragraph 45).

With regard to actions for damages brought against the SRB in the context of BPE case, in light of the EU case law on the conditions for damages to be granted, the SRB considers that the possibility of outflow of resources from the SRB’s budget as result of these actions is remote. In addition, with regard to actions for damages based on the alleged unlawfulness of the SRB’s resolution decision, the SRB has also noted that such claims for damages should be considered premature. This is due to the fact that the administrative procedure which will lead to the SRB’s final decision whether to compensate former shareholders and creditors of BPE on the basis of the ‘no creditor worse off’ principle is still ongoing.

Paragraph 33

The SRB would like to note that the legal requirements regarding the calculation of contributions are appropriately taken into account in order to eliminate any potential risk of inaccuracy. Moreover, the SRB would like to note that the SRB discloses all the information underlying its decision on the calculation of the ex ante contributions to the maximum extent allowed under the legal framework. In particular, each institution is provided with the methodology and the information related to that specific institution. However, due to professional secrecy obligations arising from the Treaty on the Functioning of the European Union, the SRB is legally prevented from disclosing to a specific institution confidential information of other institutions which is also taken into account in order to calculate the contributions.

Paragraphs 35-37

It is recalled that the national proceedings on ex-ante contributions are handled by the NRAs, which are parties to those proceedings. Therefore, the SRB, not being party in such proceedings, has no direct access to this information and inevitably relies on NRAs’ input.

The provision of data on the national appeals/court cases regarding ex-ante contributions by the NRAs to the SRB is, therefore, done in the context of good cooperation and not on the basis of an explicit legal requirement.

Following the last year’s recommendation of ECA, the SRB has undertaken significant steps to enhance the reporting from the NRAs. In particular, the SRB agreed with the NRAs on a practical arrangement involving regular reporting that would allow the SRB to monitor the evolution of national appeals and court cases over time. In more detail, the NRAs report data on the national appeals/court cases on ex-ante contributions with relevant details on the date, purpose and amount disputed not on aggregate basis but for each institution separately. Moreover, based on the recommendations of ECA, the SRB would like to note that as of September 2018, the NRAs started to provide data regarding the history of each litigation file, allowing the SRB to have an adequate audit trail. The SRB considers that the reporting of the NRAs includes all the information required for preparing its annual accounts in line with the SRB’s internal control standards.

In order to ensure the accuracy of the information, the SRB reconciles the individual amounts declared by the NRAs under the above reporting arrangement, with the amounts of ex ante contributions for each institution calculated by the SRB for the respective year.

Moreover, it is noted that the NRAs update the relevant information three times per year, which is sufficient to ensure the timeliness of the information.

In light of the above, the SRB considers that all actions that have been taken with regard to ex ante contribution cases contribute to ensuring the accuracy, completeness and timeliness of the information provided by the NRAs and on which the SRB bases its annual accounts.

Paragraph 39

The SRB would like to note that, with respect to the double counting of some amounts, a footnote on page 32 of the Final Annual Accounts was added for a better understanding since some cases at national and European level concern the same contribution amounts. The SRB sees merits in disclosing the amounts concerned at national and European levels as these levels are not fully interlinked and they have their own dynamics. Still, the SRB acknowledges that indicating separately the amounts counted twice provides further insights in the overall exposure.

Paragraph 45

The SRB would like to note that in view of preparing its Annual Accounts, the SRB did a preliminary analysis on the opportunity of booking a provision/contingent liability for legal costs. In the absence of any reliable estimation of the amounts of legal costs that the SRB could be required to pay, the costs paid and accrued during the year 2017 were considered sufficient and no provision/contingent liability was recognised in this respect.

Even if the SRB was required to compensate the legal costs of the applicants in all cases against the SRB (which at this point in time is not expected), this amount would be significantly lower than the level of materiality for the SRB, and thus would not lead to material misstatement of the SRB’s financial position.

Recommendation 1

The SRB accepts this recommendation of the ECA.

In applying the accurate treatment for provisions and contingent liabilities arising from amounts in dispute and legal costs, the SRB is acting in full compliance with the EU Accounting Rule no 10 which remains the prevailing rule. Any accounting policy derived from this rule is to better support understanding of requirements, to enable a simplified approach and to ensure the consistent application of this accounting rule. The SRB will add in its accounting policy a specific paragraph on the accounting treatment of the legal costs.

The accounting policy is in the last stage of internal consultations and it will be adopted by the end of 2018.

Paragraph 56

Please see the SRB’s reply to paragraphs 19-20.

Recommendation 2

The SRB accepts this recommendation of the ECA.

Paragraph 57

Please see SRB’s replies to paragraphs 35-37 and recommendation 3.

Recommendation 3

The SRB partially accepts this recommendation of the ECA.

With regard to the ex ante contributions cases, in light of the considerations expressed by the SRB in reply to paragraphs 35-37 above, the SRB is of the opinion that all actions that have been taken contribute to the accuracy, completeness and timeliness of the information provided by the NRAs and on which the SRB bases its annual accounts.

In order to provide the ECA with further assurance that the information provided by the NRAs on which the SRB bases its annual accounts is appropriate, the SRB will explore with the NRAs the possibility that the NRAs will provide the SRB with representation letters regarding the amounts of contingent liabilities arising from the national proceedings related to ex ante contributions.

With regard to the resolution cases, the SRB will liaise with the relevant NRAs in order to discuss the practical arrangements which can be put in place.