REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the review of Articles 13, 18 and 45 as regards EBA's powers to conduct binding mediation to take account of future developments in financial services law
Date: 2017-11-27
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: aid for restructuring, company in difficulties, credit institution, economic stabilisation, financial aid, financial intervention, financial services, financial solvency, investment company

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.11.2017  COM(2017) 661 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the review of Articles 13, 18 and 45 as regards EBA's powers to conduct binding mediation to take account of future developments in financial services law  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the review of Articles 13, 18 and 45 as regards EBA's powers to conduct binding 
mediation to take account of future developments in financial services law 

INTRODUCTION 

In accordance with Article 129 of Directive 2014/59/EU on establishing a framework for recovery 
and  resolution  of  credit  institutions  and  investment  firms  (“BRRD”)  and  after  consulting  the 
European  Banking  Authority  (EBA),  the  European  Commission  has  prepared  this  report  to  the 
European  Parliament  and  the  Council  on  the  review  of  the  application  of  Articles  13  (Group 
Resolution  Plan),  18  (Impediment  to  resolvability:  group  treatment)  and  45  (MREL)  as  regards 
EBA's power to conduct binding mediation to take account of developments in financial services.  

PROVISIONS 

Articles  13,  18  and  45  BRRD  are  based  on  the  general  principle  that  ,  with  respect  to  groups 
decisions in the respective areas should be taken jointly by  the resolution authorities concerned. 
All  three  provisions  set  out  a  period  of  four  months  during  which  an  agreement  in  this  respect 
must  be  reached.  Articles  13  and  18  establish  that  during  this  period  EBA  can  be  tasked  with 
assisting  the  authorities  in  reaching  a  joint  decision  with  respect  to  group  resolutions  plans  and 
impediment to resolvability respectively, if it is requested by a resolution authority. Moreover, the 
three provisions establish that in absence of a joint decision any resolution authority can, at the end 
of the four months' period (which counts as conciliation period for the purposes of Article 19(2) 
EBA  Regulation)1  refer  the  matter  to  EBA  requesting  it  to  take  a  binding  mediation  decision  in 
accordance with Article 19 of the EBA Regulation. In such case, the responsibility to decide on the 
matter  is  deferred  by  the  initially  responsible  resolution  authority  to  EBA.  In  accordance  with 
Article  19(3)  of  that  Regulation,  EBA  shall  take  its  decision  within  one  month.  The  decision  of 
EBA is then binding on the respective resolution authorities.   

The following table compares non-binding and binding mediation powers of EBA and shows the 
subjects of the respective provisions. 

1 Regulation (EU) No 1093/2010 to EBA. 

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Articles 

Non-binding mediation powers 
(Art.31(c) EBA Regulation) 

Binding mediation powers 
(Art.19(3) EBA Regulation) 

Upon request of a resolution 
authority, EBA may assist in 
reaching a joint decision during 
the conciliation period (para. 4). 
(exception: decision may impinge 
on MS fiscal responsibilities 
(para. 9)) 
Upon request of a resolution 
authority, EBA may assist in 
reaching a joint decision during 
the conciliation period (para. 5)  

Group 
Resolution 
Plans  
(Art. 13) 

impediments 
to group 
resolution  
(Art. 18) 

MREL  
(Art. 45) 

If decision is referred by a resolution 
authority to EBA at the end of the 
conciliation period 
- on group level (para. 5)  
- on subsidiary level (para. 6) 

If decision at group level (para. 6) or at 
subsidiary level (para. 7) is deferred by a 
resolution authority to EBA at the end of the 
conciliation period in case of measures on 
- changing legal or operational structures 
- establishing a parent financial holding 
- establishing a separate financial holding 
company to control a subsidiary 
If decision at group level (para. 9) or at 
subsidiary level (para. 10) is deferred by a 
resolution authority to EBA at the end of the 
conciliation period 

In detail, Article 13(4) BRRD stipulates that a  group resolution plan shall be decided jointly by 
the group-level authority and the resolution authority of the subsidiaries. EBA can be consulted to 
assist in this process. In absence of a joint decision on the resolution plan within four months after 
the information was conveyed, the group-level authority shall take its decision at group level and 
the resolution authorities of the subsidiaries shall take their decisions at individual level (paragraph 
5  and  6,  respectively).  If  however,  any  resolution  authority  refers  the  matter  within  the  four 
months  period  to  EBA,  the  group-level  authority  or  the  resolution  authority  responsible  for  the 
subsidiary  on  an  individual  basis  shall  defer  its  decision  and  await  any  decision  that  EBA  may 
take. EBA shall take its decision within a month which then is binding for the relevant authority 
and be applied by the other resolution authorities concerned.  

However,  if  impediments  to  resolution  are  identified  by  the  group-level  resolution  authority  the 
deadline for the preparation of the group resolution plan is suspended.2 In this case the institution 
has to propose to the resolution authority possible measures to address or remove the substantive 
impediments  within  four  months.  The  resolution  authority  shall  assess  whether  the  proposed 
measures are effective.   

If the resolution authority assess that the measures proposed do not effectively reduce or remove 
the impediments in question, it shall require the institution to take alternative measures. In a group 
context, pursuant to Article 18 of the BRRD, the group-level resolution  authority  in cooperation 
with  the  consolidating  supervisor  and  EBA  must  prepare  a  report  on  measures  to  address  such 
impediments.   

The Union parent undertaking may submit observations within four months of the date of receipt 
of the report.  

The group-level resolution authority and the resolution authorities of the subsidiaries, within four 
months of receipt of the observations from the parent undertaking or upon expiry of the deadline to 
provide them, shall reach a joint decision on the identification of material impediments and relief 
measures after consulting the competent authority and the resolution authorities of the jurisdictions 
of relevant branches and after taking into consideration potential observations of the Union parent 
undertaking. Pursuant to paragraph (5) of Article 18, EBA can be consulted to assist in reaching a 
joint  decision.  In  absence  of  a  joint  decision  on  the  report  on  impediments  to  resolvability,  the 

2 Article 17(2) BRRD. 

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group  level  authority  shall  take  its  decision  at  group  level,  and  the  resolution  authorities  of  the 
subsidiaries shall take their decisions at individual level. However, during the four month period, 
EBA can be asked to provide binding mediation3 with reference to measures regarding significant 
changes  to  legal  or  operational  structures,4  the  establishment  of  a  holding  company5  or  the 
establishment of a holding with the purpose to control the institution.6  If any resolution authority 
refers the matter within the four months period to EBA, the group-level authority or the resolution 
authority responsible for the subsidiary on an individual basis shall defer their decisions and await 
any decision that EBA may take. EBA shall take its binding decision within a month.    

According to Article 45(9) BRRD on the application of the minimum requirement for own funds 
and eligible liabilities, the group-level resolution authority and the resolution authority responsible 
for the subsidiaries on an individual basis shall do everything within their power to reach a joint 
decision  on  the  consolidated  minimum  requirement.  In  absence  of  a  joint  decision  by  relevant 
resolution authorities on the minimum requirement at consolidated level, a decision shall be taken 
by  the  group-level  authority  after  duly  taking  into  consideration  the  assessment  of  subsidiaries 
performed by the relevant resolution authority. In absence of a joint decision on subsidiary level, 
the  decision  shall  be  taken  by  the  respective  resolution  authorities  of  the  subsidiaries  after  duly 
considering  the  views  and  reservations  expressed  by  the  group-level  resolution  authority.  If  any 
resolution  authority  refers  the  matter  within  a  four  months  period  to  EBA,  the  group-level 
authority, or respectively, the resolution authority responsible for the subsidiary on  an individual 
basis  shall  defer  its  decision  and  shall  await  any  decision  that  EBA  may  take  within  a  month, 
which is then binding for the concerned resolution authorities. The decision shall be reviewed and 
where relevant updated on a regular basis. 

EXPERIENCE GATHERED FROM APPLICATION OF MEDIATION POWERS BY EBA  

Since  its  establishment  by  Regulation  (EU)  No.  1093/2010,  EBA  has  received  nine  requests  for 
mediation  out  of  which  three  for  binding  and  for  six  non-binding  mediation.  Out  of  such  nine 
cases, two mediation requests have been submitted to EBA on the basis of the BRRD, which came 
into  force  on  1  January  2015.7  Until  now  all  requests  for  mediation  proceedings  (binding,  non-
binding)  have  ultimately  been  settled  by  an  agreement  between  the  parties  concerned  under  the 
guidance and assistance of EBA. For this reason, so far there was no need to proceed with binding 
mediation to reach a decision.   

Experience from these cases, albeit limited, seems to indicate that the mediation process can be an 
effective tool to incentivise joint decisions between competent authorities since EBA was able to 
settle disagreements within the conciliation phase8 (or within the non-binding mediation9).   

Nevertheless,  no  joint  decisions  were  taken  with  respect  to  measures  to  address  or  remove 
substantive  impediments10  and  with  respect  to  minimum  requirement  for  own  funds  and  eligible 
liabilities (MREL).11 

Based on this limited experience, challenges for the effective application of its mediation powers 
could be identified as follows:  

 
 
 

limits to the participation of resolution authorities in mediation panels; 
lack of power for EBA to open a conciliation or a binding mediation on its own initiative  
implications of the current BRRD provision on fiscal safeguards. 

3 Article 18(9) BRRD. 
4 Article 17(5) (g) BRRD. 
5 Article 17(5) (h) BRRD. 
6 Article 17(5) (k) BRRD. 
7 One case related to non-binding mediation, the other concerned originally a request for binding mediation which was 
subsequently withdrawn and resubmitted as non-binding mediation. 
8 Article 19(2) EBA Regulation. 
9 Article 31(c) EBA Regulation. 
10 Article 18 BRRD. 
11 Article 45 BRRD. 

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CHALLENGES IDENTIFIED 

1.  COMPOSITION OF MEDIATION PANELS 

The  EBA  Regulation  limits  the  participation  of  resolution  authorities  in  mediation  panels.  The 
relevant provisions in this respect limit participation to panels for the settlement of disagreements 
to voting members of the EBA Board of Supervisors.12   

As a result, the EBA Regulation excludes the participation of several entities (which are not voting 
members of the EBA BoS) from mediation panels, including the Single Resolution Board (SRB), 
the  ECB  and  national  resolution  authorities.13  The  reduced  participation  of  resolution  authorities 
creates  potentially  contradictory  situations  in  case  of  mediations  concerning  resolution  issues, 
since the entities that are supposed to manage resolution matters may not articulate their interests 
and concerns and contribute to relevant mediation decisions.   

On  the  other  hand,  Article  127  BRRD  requires  EBA  to  create  a  permanent  committee  for 
Resolution  within  EBA  composed  by  senior  representatives  of  resolution  authorities  for  the 
purpose  of  preparing  decisions  of  the  BoS  in  accordance  with  Article  41  and  44  of  the  EBA 
Regulation.  

Against this background, it may be assessed whether in cases of disagreement involving resolution 
authorities, the members and substitutes of the Panel could appoint an alternate from the ResCo. 
Concretely, this would mean that a mediation panel would be composed of the Chairperson of the 
BoS  and  of  six  other  members,  which  should  be  members  of  the  BoS  in  cases  of  disagreement 
concerning  supervisory  matters,  and  members  of  the  ResCo  when  the  disagreement  concerns 
resolution  matters.  In  cases  where  the  disagreement  concerns  both  a  resolution  matter  and  a 
supervisory  matter  the  six  other  members  should  comprise  three  members  of  the  BoS  and  three 
members of the ResCo. 

In any event this issue will be solved by the recent Commission proposal for a Regulation on the 
review  ot  he  European  Supervisory  Authorities  ("ESAs  review")  will  be  adopted.14  The 
Commission  text,  in  particular,  contains  proposed  amendments  to  Article  41  of  the  EBA 
Regulation. Should these proposed amendments be confirmed in the final legislative text, panels 
would be eliminated entirely from the EBA Regulation. 

2.  POWER OF INITIATIVE  

According to Articles 13, 18 and 45 BRRD, EBA has the power to intervene with the objective to 
foster  conciliation  and  adopt  binding  mediation  measures  only  upon  request  of  a  resolution 
authority.   

It  is  arguable  that  foreseeing  the  possibility  for  EBA  to  intervene  on  its  own  initiative  in  the 
context of conciliation and binding mediation under BRRD would increase the likelihood of joint 
decisions and reduce the risk of separate decisions by individual authorities. Moreover, the power 
to  adopt  binding  mediation  measures  on  own  initiative  might  facilitate  the  EBA's  role  in  the 
context  of  mediation  panels,  as  it  would  allow  it  to  take  measures  earlier  in  the  process.  Thus, 
enhanced  conciliation  and  mediation  powers  may  lead  to  more  effectiveness  by  preventing 
disagreement and enhancing the motivation for resolution authorities to reach an agreement early 
on. 

The  Commission  proposal  for  the  ESAs  review  addresses  this  issue,  as  it  contains  proposed 
amendments  to  Article  19  of  the  EBA  Regulation15  and  attributes  powers  to  EBA  to  assist 
competent authorities to reach an agreement also on its own initiative. 

12 Article 41(2) and 41(3) of the EBA Regulation, as clarified by recital (15) of Regulation 1022/2013 (which amended 
the EBA Regulation). 
13 National Resolution Authorities can attend only BoS meetings when they accompany representatives of national 
administrations. 
14 COM(2017)536 final. 
15 Article 1(9) of the Commission proposal. 

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3.  FISCAL SAFEGUARDS 

Article 13(9) BRRD stipulates that EBA may exercise its binding mediation powers only if none 
of the resolution authorities concerned assesses that the subject matter under disagreement may in 
any way impinge on its Member States’ fiscal responsibilities. 

The fiscal safeguard contained in this provision may lead to discrepancies with the corresponding 
safeguard in Article 38 of the EBA Regulation.   

 In particular, under Article 13(9) it can be argued that that resolution authorities are conferred the 
power to prevent mediation by EBA by raising that the mediation decision may impinge on a MS' 
fiscal responsibility and to do so solely on the basis of their own assessment.  

Article 38 of the EBA Regulation is more specific. The provision requires EBA to ensure that no 
mediation  decision  impinges  on  the  fiscal  responsibilities  of  Member  States  and  provides  that 
Member  States  may  notify,  ex-post  (i.e.  after  adoption  of  the  decision)  their  concerns  about  a 
mediation decision impinging on their fiscal responsibilities. Also, the notification must be made 
to both EBA and the Commission, within a certain period after the notification of the decision to 
the competent authority.  

CONCLUSION 

Mediation is a key component of the resolution process and can be extremely useful to ensure that 
decisions  with  respect  to  complex  issues  regarding  groups  of  entities,  such  as  the  adoption  of  a 
resolution plan, addressing impediments to resolution and the definition of MREL levels, are taken 
in the form of joint decisions. This is in line with the underlying principles of the BRRD and can 
facilitate the resolution process. 

The Commissionproposal on the ESAs review addresses some of the issues highlighted above.  

For  the  remaining  issues,  and  depending  on  the  outcome  of  the  legislative  procedure  on  the 
Commission proposals on the ESAs review, the Commission will consider them as appropriate and 
based on further experience gathered in the general review of theBRRD which the Commission is 
mandated to carry out. 16 

16 Article 129 BRRD. 

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