Opinion of the European Central Bank of 12 September 2014 on the implementation of the European Bank Recovery and Resolution Directive (CON/2014/67)
Date: 2014-09-12
Institutions: European Central Bank
Subjects: Germany, banking supervision, company in difficulties, credit institution, financial stability, investment company, national law

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  (hereinafter  the  ‘draft  law’)  which  transposes  Directive 
2014/59/EU of the European Parliament and the Council1 (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/EC2,  as  the  draft  law  relates  to  the  Deutsche  Bundesbank  and  to  rules  applicable  to  financial 

institutions  insofar  as  they  materially  influence  the  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 (hereinafter the ‘Statute of the 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 jointly 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  resolution  of  institutions  and  financial  groups  and  by 

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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). 
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). 

 
 
 
 
                                                 
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providing for amendments to several legal acts, 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  changes  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 and 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  Financial  Supervisory  Authority  (BaFin)  retains  its 

supervisory tasks as the national supervisory authority. 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 subject institutions to simplified requirements or 

to  exempt  them  from  the  obligation  to  draw  up  recovery  plans  altogether,  subject  to  certain 

conditions relating to the institution’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  the  institution’s  financial  situation  where  this  has 

been subject to rapid deterioration, and are not limited 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  which  institutions  may  enter  into  agreements  to 

provide financial support to other group entities that meet the conditions for early intervention. 

(f) 

It  sets  out  the  conditions  for  the  resolution  of  institutions,  allowing  both  the  supervisory  and  the 

resolution authority, following mutual consultation, to determine whether an institution is failing or 

likely to fail. 

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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). 
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). 
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). 
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). 

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(g) 

It  confers  wide-ranging  resolution  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 provide 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  Council  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  strengthens  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 common 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  relating  to  the  bail-in  tool  will  enter  into  force  on  1 January 20157, 

and  thus  prior  to  the  BRRD’s  transposition  deadline  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 

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See Article 8 of the draft law and Part 4 Chapter 2 Section 1 of the proposed Restructuring and Resolution Act. 

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draft  law  does  not  cover  the  detailed  arrangements  relating  to  this  process,  which  will  be  decided  on 

separately. 

The BRRD ‘exceptionally’ allows one authority to carry out both resolution and supervisory functions on 

the  condition  that  adequate  structural  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  structural  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  independence  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 following 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 authorities and the Deutsche Bundesbank, 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  supervision  functions  within  the  framework  of  one 

authority,  the  resolution  function  will  have  equal  access  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-delegate this power to the resolution authority. Such sub-delegation to 

the resolution authority in the field of early intervention powers seems inappropriate given that the early 

intervention  powers  lie  with  the  supervisory  authority,  which  would  therefore  appear  best  placed  to 

specify  the  relevant  trigger  conditions.  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 regarding 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 financial support may be authorised10.  

8  
9  
10  

See Article 3(3) of the BRRD. 
See Section 6(1) of the proposed Restructuring and Resolution Act. 
See Section 30(2) of the proposed Restructuring and Resolution Act. 

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In addition, the ECB would like to  emphasise that the competence to issue regulations delegated to the 

Ministry  of  Finance  or  another  authority  regarding  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  extraordinary  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 central 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  decide  independently  and  at  their  full  discretion  on  the 

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

operations  and  in  emergency  liquidity  assistance,  within  the  limits  imposed  by  the  monetary  financing 
prohibition under the Treaty11. 

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  resolution  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  introduces  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 amendment 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  Supervisory  Mechanism  (SSM)  where  the  national  authorities  will  cooperate 
with and assist the ECB under Council Regulation (EU) No 1024/201314. The ECB notes, however, that 

11  
12  
13  
14  

See paragraph 3.2 of Opinion CON/2012/99. All ECB opinions are available on the ECB website at www.ecb.europa.eu. 
See Section 62(2) of the proposed Restructuring and Resolution Act. 
See Article 2 (2) of the draft law. 
See the explanatory memorandum to the draft law relating to the new Section 7(1a) of the Banking Act.  

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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 the 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 monitoring the risks to financial stability in 

the  euro  area,  the  ECB  therefore  suggests  that  the  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 direct 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 effective 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 Banking 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,  notifications  relating  to  the  suitability  of  members  of  the 

management bodies of significant institutions must be made to national supervisory authority and not to 
the  ECB16.  Moreover,  it  should  also  be  noted  that  the  provisions  of  Regulation  (EU)  No  468/2014 

generally  also  oblige  the  receiving  authority  to  inform  the  other  relevant  authority.  The  ECB  therefore 

sees  a  need  for  the  national  law  to  accurately  reflect  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  

16  

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). 
Articles 93 and 94 of Regulation (EU) No. 648/2014.  

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