Opinion of the European Central Bank of 11 April 2013 on crisis planning and early intervention for credit institutions (CON/2013/26)
Date: 2013-04-11
Institutions: European Central Bank
Subjects: Austria, credit institution, financial intervention, financial stability, financial supervision, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 11 April 2013 

on crisis planning and early intervention for credit institutions 

(CON/2013/26) 

Introduction and legal basis 

On 22 February 2013, the European Central Bank (ECB) received a request from the Austrian Ministry of 

Finance (MoF) for an opinion on a draft Banking Intervention and Restructuring Act, amendments to the 

Federal Banking Act and the Financial Market Authority Act (hereinafter the ‘draft 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  the  third  and  sixth  indents  of  Article  2(1)  of  Council 

Decision 98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities  regarding  draft  legislative  provisions1,  as  the  draft  law  relates  to  the  Oesterreichische 

Nationalbank (OeNB) and contains rules applicable to banks which materially influence the stability of 

financial  institutions  and  markets.  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 

1.1  The  general  purpose  of  the  draft  law  is  to  establish  a  preventive  crisis  planning  and  early 

intervention regime for credit institutions (CIs). The draft law requires CIs to prepare recovery and 

resolution  plans.  It  also  introduces  certain  early  intervention  measures  that  may  be  taken  by  the 

Financial Market Authority (FMA) as regards CIs in breach of certain triggers (see point 1.3 below 

for details). In this way, the draft law aims to prevent CIs becoming distressed, thereby reducing 

the  likelihood  of  public  funds  needing  to  be  used  to  bail  out  CIs.  The  draft  law  is  based  on  the 

European  Commission’s  proposal  for  a  directive  on  the  recovery  and  resolution  of  credit 
institutions and investment firms dated 6 June 2012 (the BRRD)2. However, the draft law does not 

encompass resolution mechanisms as proposed in the BRRD. 

1.2 

In order to prepare for crisis scenarios, CIs shall establish recovery and resolution plans and submit 

them to the FMA. Recovery plans must describe the measures to be taken by each CI in the event 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and 
resolution  of  credit  institutions  and  investment  firms  and  amending  Council  Directives  77/91/EEC  and  82/891/EC, 
Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC,  2007/36/EC  and  2011/35/EC  and  Regulation  (EU) 
No 1093/2010, COM (2012) 280 final. 

	
 
 
 
                                                            
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of  a  significant  deterioration  in  its  financial  situation.  In  their  resolution  plans,  CIs  shall 

demonstrate  a  coordinated  approach  to  the  potential  resolution  or  reorganisation  of  the  CI. 

Recovery and resolution plans are to be updated annually or in the event of a significant change in 

the underlying conditions. The FMA shall analyse both the recovery and resolution plans, and may 

require  amendments  if  deemed  necessary.  In  this  context,  the  FMA  shall  also  seek  the  expert 

opinion of the OeNB as to whether the legal requirements for recovery and resolution plans defined 

in the draft law are met. 

If a CI is part of a group entity, the parent institution shall prepare recovery and resolution plans for 

the  entire  group,  including  recovery  plans  for  each  of  its  significant  subsidiary  institutions  and 

resolution plans for all subsidiary institutions. Referring to the principle of proportionality, the draft 

law provides for exemptions to the requirement to establish recovery and resolution plans. At the 

request of a CI, the FMA may exempt that CI from individual requirements or reduce the level of 

detail  required,  depending  on  the  nature  of  activities  of  the  institution  in  question,  its  size  or  its 

interconnectedness with other financial market participants. Furthermore, the FMA may exempt a 

CI from preparing recovery and resolution plans altogether if, in the event of that CI’s insolvency, 

there are no concerns that this would have any material adverse impact on the financial markets, on 
other CIs or on funding conditions3. 

1.3  The draft law also strengthens the FMA’s powers and tools for taking early intervention measures. 

If  a  CI  fails  to  comply  with  capital  or  liquidity  requirements  under  Directive  2006/48/EC  of  the 

European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the 
business  of  credit  institutions4  or  Directive  2006/49/EC  of  the  European  Parliament  and  of  the 
Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions5 or is at 

risk  of  violating  these  requirements,  the  FMA  shall  take  one  or  more  of  the  early  intervention 

measures set out in the draft law. A risk of violation of the above requirements exists where there is 

a substantial deterioration in a CI’s assets, earnings, liquidity or refinancing situation and where, in 

light of the negative development in question, it may be justifiably assumed that the CI is at risk of 

failing  to  fulfil  its  obligations.  In  any  event,  it  shall  be  assumed  that  a  risk  of  such  violation  is 

present if the CI’s equity is less than the threshold of 8 % plus 1.25 % common equity. In order to 

determine whether there is a need for early intervention, the FMA may order the OeNB to carry out 

on-site audits and request the OeNB’s expert opinion on this matter. 

Notwithstanding  other  existing  tools,  the  FMA  may  direct  the  following  early  intervention 

measures  in  accordance  with  the  draft  law:  (a)  the  implementation  of  one  or  more  recovery 

measures contained in the recovery plan, (b) the prompt preparation of a recovery plan if the FMA 

has previously granted an exemption with regard to the preparation or update of a recovery plan, 

3  

4  
5  

See Articles 4 and 5 (regarding recovery plans) and Articles 11 and 12 (resolution plans) of the draft Bank Intervention 
and Restructuring Act. 
OJ L 177, 30.6.2006, p. 1. 
OJ L 177, 30.6.2006, p. 201. 

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(c)  the  carrying  out  of  specific  improvements  in  or  the  intensifying  of  risk  management,  (d)  the 

convening  of  a  general  meeting  of  the  shareholders,  in  particular  for  taking  capital  measures, 

(e) the  addition  of  certain  items  to  the  agenda  of  the  general  meeting  or  proposing  that  certain 

resolutions  be  added,  (f)  the  preparation  of  a  negotiation  plan  which  envisages  the  voluntary 

restructuring of the CI’s liabilities with its creditors, or (g) an on-site audit by the OeNB with the 

aim of assessing a CI’s assets and liabilities. 

2. 

General observations 

2.1  The ECB welcomes the draft law as it strengthens the tools and procedures available to the national 

authorities for effective preventive measures and early intervention in CIs. 

2.2  The ECB welcomes the recognition by the Austrian MoF, as reflected in the explanatory notes to 

the  draft  law,  that  there  should  be  a  harmonised  approach  to  providing  effective  preventive 

measures, early intervention in and resolution of banks at Union level. 

2.3  The ECB notes that the draft law includes aspects of the recovery and resolution planning provided 

for in the BRRD. In this context, the ECB understands that the legislator will review the law once 

the  BRRD  is  adopted,  in order  to  ensure  full  consistency  with  developments  at  Union  level.  The 

ECB also refers to the Recommendations of the European Banking Authority on the development 

of  recovery  plans  (EBA/REC/2013/02)  dated  23  January  2013.  Member  States  should  avoid 

enacting  national  legislation  that  conflicts  with  developments  at  Union  level,  in  accordance  with 

the general principle of sincere cooperation and loyalty pursuant to the Treaty. 

2.4  The ECB notes that the draft law does not contain resolution tools as provided for in Title IV of the 

BRRD.  In  this  respect,  it  will  be  essential  for  an  effective  resolution  regime  that  the  authority  is 

provided with the necessary tools. 

2.5   The  ECB  notes  that  the  threshold  for  assuming  that  a  breach  of  capital  requirements  is  likely, 

which forms the basis for taking early intervention measures, is not clear in the Austrian draft law 

(8 % plus 1.25 % common equity) and asks for clarification of the intended measure. 

3. 

Principle of proportionality 

3.1 

In Article 1(5) and (12), the draft law provides for a complete exemption from a CI’s obligations to 

establish  and  update  recovery  and  resolution  plans.  The  FMA  may  exempt  CIs  from  these 

requirements if that CI’s insolvency can be presumed not to have any material adverse impact on 

the  financial  markets,  on  other  CIs  or  on  funding  conditions.  As  mentioned  in  the  explanatory 

memorandum accompanying the draft law, the ECB recognises that these provisions will be in line 

with  Article  4(1)(a)  of  the  BRRD.  However,  Article  4  of  the  BRRD  does  not  provide  for  the 

possibility to exclude CIs  altogether, but provides only for simplified obligations for certain CIs. 

Nevertheless,  the  ECB  acknowledges  the  ongoing  discussions  at  the  Council  and  the  European 

Parliament  on  the  subject  of  enabling  Member  States  to  waive  the  requirement  to  maintain  and 

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update recovery and resolution plans in certain cases, for example in the case of resolution plans if 

the institution is not part of a group or has no branches in other Member States. 

Regarding the provision in the draft law which allows for exempting smaller CIs from resolution 

planning, the ECB is of the view that it is possible to extend the requirement of resolution planning 

to  all  CIs,  while  simplifying  the  planning  requirements  for  smaller  CIs.  However,  the  ECB 

understands  that  the  consulting  authority  intends  to  address  a  possible  concern  relating  to 

proportionality and does not wish to overburden small CIs. In this respect, the ECB recommends 

that any exemptions pursuant to Article 1(5) and (12) of the draft law are granted only under very 

strict conditions in accordance with the proportionality principle of the BRRD.  

3.2 

In connection with the principle of proportionality, and without prejudice to the above comments, 

the ECB also notes that the definitions used in Articles 5(2) and 12(2) of the draft law, under which 

the FMA may exempt a CI from establishing or updating a recovery or resolution plan, are rather 

vague. In the interests of legal certainty, the ECB recommends defining clear and specific criteria, 

e.g.  size,  business  models  and  interconnectedness,  which  would  enable  the  FMA  to  exempt  a  CI 

from establishing or updating recovery and resolution plans. 

4. 

Establishment and assessment of resolution plans  

4.1 

In Article 1(11), the draft law requires CIs to prepare a resolution plan and submit it to the FMA. 

The ECB notes that this approach differs from the one currently being discussed at Union level in 

the context of the BRRD, under which the resolution authorities, in consultation with the competent 

authorities,  are  responsible  for  drawing  up  the  resolution  plans.  Under  the  BRRD,  the  resolution 

authority would, while drawing up the resolution plan, be responsible for assessing the resolvability 

of the CI or group, and would have the power to address impediments to its resolvability. The ECB 

notes  that  this  approach  is  in  line  with  the  Financial  Stability  Board  (FSB)  Key  Attributes  of 

Effective  Resolution  Regimes,  which  also  require  the  resolution  planning  and  resolvability 
assessment  to  be  conducted  by  the  resolution  authority  itself6.  Resolution  planning  and 

resolvability assessment are essential to ensuring the effectiveness of resolution. They are therefore 

key  tasks  of  the  resolution  authority,  which  will  safeguard  the  quality  of  the  planning  and  the 

assessment, as well as the institutional readiness to take resolution action if needed. The draft law 

could be further aligned with the FSB Key Attributes (as reflected in the BRRD). In any case, the 

ECB deems it of paramount importance to ensure the same high quality of the respective resolution 

plan. 

4.2 

The ECB notes that the parts of the draft law dealing with early intervention do not grant the FMA 

all the powers provided for in this area by the BRRD, as set out in Article 23 et seq. thereof. These 

provisions should be aligned with the BRRD once the BRRD is adopted. The ECB notes that, in 

6  

Key  Attributes  of  Effective  Resolution  Regimes  for  Financial  Institutions,  October  2011,  Financial  Stability  Board, 
points 10.1 and 11.4(ii) http://www.financialstabilityboard.org/publications/r_111104cc.pdf. 

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the  absence  of  a  resolution  mechanism,  an  assessment  of  resolvability  of  a  CI  or  group  will  be 

carried out on the basis that normal insolvency procedures will apply in the event of its winding up. 

This constitutes a more rigorous benchmark than an assessment of resolvability in which the use of 

resolution tools may be assumed. 

5. 

Access to central bank liquidity in the context of recovery and resolution planning 

The  ECB  notes  that  Article  1(6)(6)  of  the  draft  law  provides  that  recovery  plans  shall  not  assume  any 

access  to  or  receipt  of  extraordinary  public  financial  support,  but  that  they  shall  include  an  analysis  of 

how and when an institution may apply for the use of central bank facilities in stressed conditions, and 

what may be used as collateral. The ECB wishes to underline that this provision should not in any way 

affect  the  competence  of  central  banks  to  decide  independently  and  at  their  full  discretion  on  the 

provision  of  central  bank  liquidity  to  solvent  credit  institutions,  both  through  standard  monetary  policy 

operations as well as emergency liquidity assistance, within the limits imposed by the monetary financing 
prohibition  under  the  Treaty7.  Similarly,  the  ECB  also  notes  that,  pursuant  to  Article 1(14)(1)(9)  of  the 

draft  law,  the  resolution  plan  must  contain  an  explanation  from  the  institution  as  to  how  the  resolution 

options  should  be  financed  without  assuming  any  extraordinary  public  support.  The  ECB  recommends 

clarifying the point that resolution options may not assume the granting of emergency liquidity assistance 
by the central bank8. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 11 April 2013. 

[signed] 

The Vice-President of the ECB 

Vítor CONSTÂNCIO 

7  
8  

See ECB CON/2012/99, paragraph 3.2. 
See Amendment 6 in the Annex to ECB CON/2012/99. 

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