Article 69 Target level
1. By the end of an initial period of eight years from 1 January 2016 or, otherwise, from the date on which this paragraph is applicable by virtue of Article 99(6), the available financial means of the Fund shall reach at least 1 % of the amount of covered deposits of all credit institutions authorised in all of the participating Member States. 2. During the initial period referred to in paragraph 1, contributions to the Fund calculated in accordance with Article 70, and raised in accordance with Article 67(4), shall be spread out in time as evenly as possible until the target level is reached, but with due account of the phase of the business cycle and the impact that pro-cyclical contributions may have on the financial position of contributing institutions. 3. The Board shall extend the initial period referred to in paragraph 1 for a maximum of four years in the event that the Fund has made cumulative disbursements in excess of 0,5 % of the total amount of covered deposits referred to in paragraph 1 and where the criteria of the delegated act referred in paragraph 5(b) are met. 4. If, after the initial period referred to in paragraph 1, the available financial means diminish below the target level specified in that paragraph, the regular contributions calculated in accordance with Article 70 shall be raised until the target level is reached. After the target level has been reached for the first time and where the available financial means have subsequently been reduced to less than two-thirds of the target level, those contributions shall be set at a level allowing for reaching the target level within six years. The regular contribution shall take due account of the phase of the business cycle, and the impact pro-cyclical contributions may have when setting annual contributions in the context of this paragraph. 5. The Commission shall be empowered to adopt delegated acts in accordance with Article 93 to specify the following: (a) criteria for the spreading out in time of the contributions to the Fund calculated under paragraph 2; (b) criteria for determining the number of years by which the initial period referred to in paragraph 1 can be extended under paragraph 3; (c) criteria for establishing the annual contributions provided for in paragraph 4.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU 1 (the Bank Recovery and Resolution Directive or BRRD) and to Regulation (EU) No 806/2014 2 (the Single Resolution Mechanism Regulation or SRMR) are part of the crisis management and deposit insurance legislative package that also includes additional amendments to those acts and to Directive 2014/49/EU 3 (the Deposit Guarantee Schemes Directive or DGSD). The EU crisis management framework is well-established, however, recent episodes of bank failures have shown that there is need for improvements. The aim of the CMDI reform is to build on the objectives of the crisis management framework and to ensure a more consistent approach to resolution, so that any bank in crisis can exit the market in an orderly manner, while preserving financial stability, taxpayer money and ensuring depositor confidence. In particular, the existing resolution framework for smaller and medium-sized banks needs to be strengthened with respect to its design, implementation and, most importantly, incentives for its application, so that it can be more credibly applied to those banks. In the aftermath of the global financial and sovereign debt crises, the EU took decisive actions, in line with international calls for reform, to create a safer financial sector for the EU single market. This included providing authorities with the tools and powers to handle the failure of any bank in an orderly manner while preserving financial stability, public finances and depositor protection. T he EU framework was reformed largely based on global standards agreed with the EU’s international partners. I t consist s of four main EU legislative texts adopted in 2013 and 2014 acting together with relevant national legislation : a regulation and a directive on prudential requirements for and supervision of institutions ( the Capital Requirements Regulation ( CRR 4 ) and the Capital Requirements Directive ( CRD 5 ) ), the BRRD and the SRMR. The 2019 banking package revised the legislation by including measures delivering on the EU’s commitments made in international fora 6 to take further steps towards completing the Banking Union by providing credible risk reduction measures to mitigate threats to financial stability. T he main revision s concerned (i) the implementation in the EU of the international ‘Total Loss-absorbing Capacity (TLAC) Term Sheet ’ , published by the Financial Stability Board on 9 November 2015 (the ‘TLAC standard’) 7 , for global systemically important banks, referred to in the EU legislation as global systemically important institutions ; and (ii) the amendment of the minimum requirement for own funds and eligible liabilities (MREL) set out in BRRD and SRMR . The objective of these reforms was to ensure that the loss absorption and recapitalisation of banks, when those banks become financially unviable and are subsequently placed in resolution, would occur through private means. The revision also clarified the application of MREL at the level of subsidiaries within banking groups by introducing the concept of ‘internal MREL’ in line with a similar concept included in the TLAC standard. These requirements aim to ensure that internal arrangements are in place between group entities to transfer losses from group entities to the resolution entity, i.e. typically the parent undertaking, without placing the group entities into formal resolution, which could potentially have disruptive effects on the market. To implement this mechanism, group entities are required, based on the decision of the resolution authorities, to issue eligible liabilities that should be subscribed directly or indirectly by the resolution entity. The EU MREL framework was further amended by Regulation (EU) 2022/2036 of the European Parliament and of the Council 8 , which established methods for the indirect subscription of instruments eligible for meeting the internal MREL. On the basis of a technical assessment by the EBA pursuant to a mandate set out in Article 45f(6) BRRD , t he regulation introduced a deduction mechanism for the indirect subscriptions of internal MREL through intermediate entities in a chain of ownership (i.e. between the ultimate subsidiary and the resolution entity) to ensure the effective application of internal loss transfer s in the MREL framework. Under this mechanism, referred to as a full holdings-based deduction approach, intermediate entities are required to deduct from their own internal MREL capacity the holdings of internal MREL eligible instruments issued by other entities tha t are part of the same resolution group . The text also specifies that intermediate entities complying with internal MREL on a consolidated basis are exempted from the obligation to deduct their holdings of instruments issued by the entities included in the consolidation . This approach was preferred to a requirement-based deduction approach where the amount of deductions required of the intermediate entities would be limited by a cap corresponding to the level of the internal MREL of the issuing entity belonging to the same resolution group. Regulation (EU) 2022/2036 also mandated the Commission to review the implementation of the deduction approach for indirect subscription of internal MREL eligible resources across the different types of banking group structures, to assess any potential unintended consequences of the new deduction mechanism and to ensure proportionate treatment and a level playing field, particularly with regard to chains of ownership that include an operating company between a parent holding company and its subsidiaries (‘holdco structures’ in opposition to ‘opco structures’, where the parent entity is not a holding company). The Commission was asked to assess: (i) the possibility of allowing compliance with internal MREL on a consolidated basis in additional situations; (ii) the treatment of entities whose resolution plan provides that they are to be wound up under normal insolvency proceedings (‘liquidation entities’); and (iii) the appropriateness of limiting the deductions to an amount equivalent to the internal MREL of the issuing entity. Based on an analysis of the deduction mechanism introduced in the Regulation and a quantitative impact assessment using data provided by the Single Resolution Board (SRB), the Commission found that targeted amendments to the BRRD and the SRMR with respect to the scope of application of internal MREL requirements and the treatment of liquidation entities are necessary and appropriate. The proposed amendments will contribute to the resolvability of banks by improving the functioning and proportionality of the deduction mechanism, and will ensure that it does not create level playing field issues between different banking group structures. Given that the corresponding provisions are already in force and will become applicable in the EU on 1 January 2024, the proposed amendments need to be made in a timely manner. The need for speedy adoption is further amplified by the fact that banking groups need clarity on the deduction mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline, also set on 1 January 2024. 
Revised version (Article 69 Target level):
1. By the end of an initial period of eight years from 1 January 2016 or, otherwise, from the date on which this paragraph is applicable by virtue of Article 99(6), the available financial means of the Fund shall reach at least 1 % of the amount of covered deposits of all credit institutions authorised in all of the participating Member States. 2. During the initial period referred to in paragraph 1, contributions to the Fund calculated in accordance with Article 70, and raised in accordance with Article 67(4), shall be spread out in time as evenly as possible until the target level is reached, but with due account of the phase of the business cycle and the impact that pro-cyclical contributions may have on the financial position of contributing institutions. 3. The Board shall extend the initial period referred to in paragraph 1 for a maximum of four years in the event that the Fund has made cumulative disbursements in excess of 0,5 % of the total amount of covered deposits referred to in paragraph 1 and where the criteria of the delegated act referred in paragraph 5(b) are met. 4. If, after the initial period referred to in paragraph 1, the available financial means diminish below the target level specified in that paragraph, the regular contributions calculated in accordance with Article 70 shall be raised until the target level is reached. After the target level has been reached for the first time and where the available financial means have subsequently been reduced to less than two-thirds of the target level, those contributions shall be set at a level allowing for reaching the target level within six years. The regular contribution shall take due account of the phase of the business cycle, and the impact pro-cyclical contributions may have when setting annual contributions in the context of this paragraph.
Article 70 Ex-ante contributions
1. The individual contribution of each institution shall be raised at least annually and shall be calculated pro-rata to the amount of its liabilities (excluding own funds) less covered deposits, with respect to the aggregate liabilities (excluding own funds) less covered deposits, of all of the institutions authorised in the territories of all of the participating Member States. 2. Each year, the Board shall, after consulting the ECB or the national competent authority and in close cooperation with the national resolution authorities, calculate the individual contributions to ensure that the contributions due by all of the institutions authorised in the territories of all of the participating Member States shall not exceed 12,5 % of the target level. Each year the calculation of the contributions for individual institutions shall be based on: (a) a flat contribution, that is pro-rata based on the amount of an institution's liabilities excluding own funds and covered deposits, with respect to the total liabilities, excluding own funds and covered deposits, of all of the institutions authorised in the territories of the participating Member States; and (b) a risk-adjusted contribution, that shall be based on the criteria laid down in Article 103(7) of Directive 2014/59/EU, taking into account the principle of proportionality, without creating distortions between banking sector structures of the Member States. The relation between the flat contribution and the risk-adjusted contributions shall take into account a balanced distribution of contributions across different types of banks. In any case, the aggregate amount of individual contributions by all of the institutions authorised in the territories of all of the participating Member States, calculated under points (a) and (b), shall not exceed annually the 12,5 % of the target level. 3. The available financial means to be taken into account in order to reach the target level specified in Article 69 may include irrevocable payment commitments which are fully backed by collateral of low-risk assets unencumbered by any third-party rights, at the free disposal of and earmarked for the exclusive use by the Board for the purposes specified in Article 76(1). The share of those irrevocable payment commitments shall not exceed 30 % of the total amount of contributions raised in accordance with this Article. 4. The duly received contributions of each entity referred to in Article 2 shall not be reimbursed to those entities. 5. Where participating Member States have already established national resolution financing arrangements, they may provide that those arrangements use their available financial means, collected from institutions between 17 June 2010 and the date of entry into force of Directive 2014/59/EU, to compensate institutions for the ex-ante contributions which those institutions may be required to pay into the Fund. Such restitution shall be without prejudice to the obligations of Member States laid down in Directive 2014/49/EU. 6. The delegated acts specifying the notion of adjusting contributions in proportion to the risk profile of institutions, adopted by the Commission under Article 103(7) of Directive 2014/59/EU, shall be applied. 7. The Council, acting on a proposal from the Commission, shall, within the framework of the delegated acts referred to in paragraph 6, adopt implementing acts to determine the conditions of implementation of paragraphs 1, 2, and 3, and in particular in relation to: (a) the application of the methodology for the calculation of individual contributions; (b) the practical modalities for allocating to institutions the risk factors specified in the delegated act.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal T he proposed amendments to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities (MREL), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks (G-SIBs), referred to as global systemically important institutions (G-SIIs) in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD and SRMR frameworks remain valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any future requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution-specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and making it more resilient. This proposal covers specifically the targeted amendments to the SRMR related to the implementation of the TLAC standard in the Union. This proposal will apply to the Single Resolution Board (SRB) and national authorities of the Member States participating in the Single Resolution Mechanism (SRM) when they set and implement the requirements on loss absorbing and recapitalisation capacity of financial firms established in the Banking Union.
Revised version (Article 70 Ex-ante contributions):
1. The individual contribution of each institution shall be raised at least annually and shall be calculated pro-rata to the amount of its liabilities (excluding own funds) less covered deposits, with respect to the aggregate liabilities (excluding own funds) less covered deposits, of all of the institutions authorised in the territories of all of the participating Member States. 2. Each year, the Board shall, after consulting the ECB or the national competent authority and in close cooperation with the national resolution authorities, calculate the individual contributions to ensure that the contributions due by all of the institutions authorised in the territories of all of the participating Member States shall not exceed 12,5 % of the target level. Each year the calculation of the contributions for individual institutions shall be based on: (a) a flat contribution, that is pro-rata based on the amount of an institution's liabilities excluding own funds and covered deposits, with respect to the total liabilities, excluding own funds and covered deposits, of all of the institutions authorised in the territories of the participating Member States; and (b) a risk-adjusted contribution, that shall be based on the criteria laid down in Article 103(7) of Directive 2014/59/EU, taking into account the principle of proportionality, without creating distortions between banking sector structures of the Member States. The relation between the flat contribution and the risk-adjusted contributions shall take into account a balanced distribution of contributions across different types of banks. In any case, the aggregate amount of individual contributions by all of the institutions authorised in the territories of all of the participating Member States, calculated under points (a) and (b), shall not exceed annually the 12,5 % of the target level. 3. The available financial means to be taken into account in order to reach the target level specified in Article 69 may include irrevocable payment commitments which are fully backed by collateral of low-risk assets unencumbered by any third-party rights, at the free disposal of and earmarked for the exclusive use by the Board for the purposes specified in Article 76(1). The share of those irrevocable payment commitments shall not exceed 30 % of the total amount of contributions raised in accordance with this Article. 4. The duly received contributions of each entity referred to in Article 2 shall not be reimbursed to those entities. 5. Where participating Member States have already established national resolution financing arrangements, they may provide that those arrangements use their available financial means, collected from institutions between 17 June 2010 and the date of entry into force of Directive 2014/59/EU, to compensate institutions for the ex-ante contributions which those institutions may be required to pay into the Fund. Such restitution shall be without prejudice to the obligations of Member States laid down in Directive 2014/49/EU. 6. The delegated acts specifying the notion of adjusting contributions in proportion to the risk profile of institutions, adopted by the Commission under Article 103(7) of Directive 2014/59/EU, shall be applied. 7. The Council, acting on a proposal from the Commission, shall, within the framework of the delegated acts referred to in paragraph 6, adopt implementing acts to determine the conditions of implementation of paragraphs 1, 2, and 3, and in particular in relation to: (a) the application of the methodology for the calculation of individual contributions; (b) the practical modalities for allocating to institutions the risk factors specified in the delegated act. The Council, acting on a proposal from the Commission, shall, within the framework of the delegated acts referred to in paragraph 6, adopt implementing acts to determine the conditions of implementation of paragraphs 1, 2, and 3, and in particular in relation to: (a) the application of the methodology for the calculation of individual contributions; (b) the practical modalities for allocating to institutions the risk factors specified in the delegated act.
Article 71 Extraordinary ex-post contributions
1. Where the available financial means are not sufficient to cover the losses, costs or other expenses incurred by the use of the Fund in resolution actions, extraordinary ex-post contributions from the institutions authorised in the territories of participating Member States shall be raised, in order to cover the additional amounts. Those extraordinary ex-post contributions shall be calculated and allocated between institutions in accordance with the rules laid down in Articles 69 and 70. The total amount of extraordinary ex-post contributions per year shall not exceed three times the annual amount of contributions determined in accordance with Article 70. 2. The Board shall, on its own initiative after consulting the national resolution authority or upon proposal by a national resolution authority, defer, in whole or in part, in accordance with the delegated acts referred to in paragraph 3, an institution's payment of extraordinary ex-post contributions in accordance with paragraph 1 if it is necessary to protect its financial position. Such a deferral shall not be granted for a period of longer than six months but may be renewed on request of the institution. The contributions deferred pursuant to this paragraph shall be made later at a point in time when the payment no longer jeopardises the institution's financial position. 3. The Commission shall be empowered to adopt delegated acts in accordance with Article 93 to specify the circumstances and conditions under which the payment of ex-post contributions by an entity referred to in Article 2 may be partially or entirely deferred pursuant to paragraph 2 of this Article.
Article 72 Voluntary borrowing between resolution financing arrangements
1. The Board shall decide to make a request to voluntarily borrow for the Fund from resolution financing arrangements within non-participating Member States, in the event that: (a) the amounts raised under Article 70 are not sufficient to cover the losses, costs or other expenses incurred by the use of the Fund in relation to resolution actions; (b) the extraordinary ex-post contributions provided for in Article 71 are not immediately accessible; and (c) the alternative funding means provided for in Article 73 are not immediately accessible on reasonable terms. 2. Those resolution financing arrangements shall decide on such a request in accordance with Article 106 of Directive 2014/59/EU. The borrowing conditions shall be subject to Article 106(4), (5) and (6) of Directive 2014/59/EU. 3. The Board may decide to lend to other resolution financing arrangements within non-participating Member States if a request is made in accordance with Article 106 of Directive 2014/59/EU. The lending conditions shall be subject to Article 106(4), (5) and (6) of Directive 2014/59/EU.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU 1 (the Bank Recovery and Resolution Directive or BRRD) and to Regulation (EU) No 806/2014 2 (the Single Resolution Mechanism Regulation or SRMR) are part of the crisis management and deposit insurance legislative package that also includes additional amendments to those acts and to Directive 2014/49/EU 3 (the Deposit Guarantee Schemes Directive or DGSD). The EU crisis management framework is well-established, however, recent episodes of bank failures have shown that there is need for improvements. The aim of the CMDI reform is to build on the objectives of the crisis management framework and to ensure a more consistent approach to resolution, so that any bank in crisis can exit the market in an orderly manner, while preserving financial stability, taxpayer money and ensuring depositor confidence. In particular, the existing resolution framework for smaller and medium-sized banks needs to be strengthened with respect to its design, implementation and, most importantly, incentives for its application, so that it can be more credibly applied to those banks. In the aftermath of the global financial and sovereign debt crises, the EU took decisive actions, in line with international calls for reform, to create a safer financial sector for the EU single market. This included providing authorities with the tools and powers to handle the failure of any bank in an orderly manner while preserving financial stability, public finances and depositor protection. T he EU framework was reformed largely based on global standards agreed with the EU’s international partners. I t consist s of four main EU legislative texts adopted in 2013 and 2014 acting together with relevant national legislation : a regulation and a directive on prudential requirements for and supervision of institutions ( the Capital Requirements Regulation ( CRR 4 ) and the Capital Requirements Directive ( CRD 5 ) ), the BRRD and the SRMR. The 2019 banking package revised the legislation by including measures delivering on the EU’s commitments made in international fora 6 to take further steps towards completing the Banking Union by providing credible risk reduction measures to mitigate threats to financial stability. T he main revision s concerned (i) the implementation in the EU of the international ‘Total Loss-absorbing Capacity (TLAC) Term Sheet ’ , published by the Financial Stability Board on 9 November 2015 (the ‘TLAC standard’) 7 , for global systemically important banks, referred to in the EU legislation as global systemically important institutions ; and (ii) the amendment of the minimum requirement for own funds and eligible liabilities (MREL) set out in BRRD and SRMR . The objective of these reforms was to ensure that the loss absorption and recapitalisation of banks, when those banks become financially unviable and are subsequently placed in resolution, would occur through private means. The revision also clarified the application of MREL at the level of subsidiaries within banking groups by introducing the concept of ‘internal MREL’ in line with a similar concept included in the TLAC standard. These requirements aim to ensure that internal arrangements are in place between group entities to transfer losses from group entities to the resolution entity, i.e. typically the parent undertaking, without placing the group entities into formal resolution, which could potentially have disruptive effects on the market. To implement this mechanism, group entities are required, based on the decision of the resolution authorities, to issue eligible liabilities that should be subscribed directly or indirectly by the resolution entity. The EU MREL framework was further amended by Regulation (EU) 2022/2036 of the European Parliament and of the Council 8 , which established methods for the indirect subscription of instruments eligible for meeting the internal MREL. On the basis of a technical assessment by the EBA pursuant to a mandate set out in Article 45f(6) BRRD , t he regulation introduced a deduction mechanism for the indirect subscriptions of internal MREL through intermediate entities in a chain of ownership (i.e. between the ultimate subsidiary and the resolution entity) to ensure the effective application of internal loss transfer s in the MREL framework. Under this mechanism, referred to as a full holdings-based deduction approach, intermediate entities are required to deduct from their own internal MREL capacity the holdings of internal MREL eligible instruments issued by other entities tha t are part of the same resolution group . The text also specifies that intermediate entities complying with internal MREL on a consolidated basis are exempted from the obligation to deduct their holdings of instruments issued by the entities included in the consolidation . This approach was preferred to a requirement-based deduction approach where the amount of deductions required of the intermediate entities would be limited by a cap corresponding to the level of the internal MREL of the issuing entity belonging to the same resolution group. Regulation (EU) 2022/2036 also mandated the Commission to review the implementation of the deduction approach for indirect subscription of internal MREL eligible resources across the different types of banking group structures, to assess any potential unintended consequences of the new deduction mechanism and to ensure proportionate treatment and a level playing field, particularly with regard to chains of ownership that include an operating company between a parent holding company and its subsidiaries (‘holdco structures’ in opposition to ‘opco structures’, where the parent entity is not a holding company). The Commission was asked to assess: (i) the possibility of allowing compliance with internal MREL on a consolidated basis in additional situations; (ii) the treatment of entities whose resolution plan provides that they are to be wound up under normal insolvency proceedings (‘liquidation entities’); and (iii) the appropriateness of limiting the deductions to an amount equivalent to the internal MREL of the issuing entity. Based on an analysis of the deduction mechanism introduced in the Regulation and a quantitative impact assessment using data provided by the Single Resolution Board (SRB), the Commission found that targeted amendments to the BRRD and the SRMR with respect to the scope of application of internal MREL requirements and the treatment of liquidation entities are necessary and appropriate. The proposed amendments will contribute to the resolvability of banks by improving the functioning and proportionality of the deduction mechanism, and will ensure that it does not create level playing field issues between different banking group structures. Given that the corresponding provisions are already in force and will become applicable in the EU on 1 January 2024, the proposed amendments need to be made in a timely manner. The need for speedy adoption is further amplified by the fact that banking groups need clarity on the deduction mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline, also set on 1 January 2024. 
Revised version (Article 72 Voluntary borrowing between resolution financing arrangements):
2. Those resolution financing arrangements shall decide on such a request in accordance with Article 106 of Directive 2014/59/EU. The borrowing conditions shall be subject to Article 106(4), (5) and (6) of Directive 2014/59/EU. 3. The Board may decide to lend to other resolution financing arrangements within non-participating Member States if a request is made in accordance with Article 106 of Directive 2014/59/EU. The lending conditions shall be subject to Article 106(4), (5) and (6) of Directive 2014/59/EU.
Article 73 Alternative funding means
1. The Board may contract for the Fund borrowings or other forms of support from those institutions, financial institutions or other third parties, which offer better financial terms at the most appropriate time so as to optimise the cost of funding and preserve its reputation in the event that the amounts raised in accordance with Articles 70 and 71 are not immediately accessible or do not cover the expenses incurred by the use of the Fund in relation to resolution actions. 2. The borrowing or other forms of support referred to in paragraph 1 shall be fully recouped in accordance with Articles 69, 70 and 71 within the maturity period of the loan. 3. Any expenses incurred by the use of the borrowings specified in paragraph 1 shall be borne by Part II of the budget of the Board and not by the Union budget or the participating Member States.
Article 74 Access to financial facility
The Board shall contract for the Fund financial arrangements, including, where possible, public financial arrangements, regarding the immediate availability of additional financial means to be used in accordance with Article 76, where the amounts raised or available in accordance with Articles 70 and 71 are not sufficient to meet the Funds' obligations.
Article 75 Investments
1. The Board shall administer the Fund in accordance with this Regulation and delegated acts adopted under paragraph 4. 2. The amounts received from an institution under resolution or a bridge institution, the interests and other earnings on investments and any other earnings shall benefit only the Fund. 3. The Board shall have a prudent and safe investment strategy that is provided for in the delegated acts adopted pursuant to paragraph 4 of this Article, and shall invest the amounts held in the Fund in obligations of the Member States or intergovernmental organisations, or in highly liquid assets of high creditworthiness, taking into account the delegated act referred to in Article 460 of Regulation (EU) No 575/2013 as well as other relevant provisions of that Regulation. Investments shall be sufficiently sectorally, geographically and proportionally diversified. The return on those investments shall benefit the Fund. 4. The Commission shall be empowered to adopt delegated acts on the detailed rules for the administration of the Fund and general principles and criteria for its investment strategy, in accordance with the procedure laid down in Article 93.
Article 76 Mission of the Fund
1. Within the resolution scheme, when applying the resolution tools to entities referred to in Article 2, the Board may use the Fund only to the extent necessary to ensure the effective application of the resolution tools for the following purposes: (a) to guarantee the assets or the liabilities of the institution under resolution, its subsidiaries, a bridge institution or an asset management vehicle; (b) to make loans to the institution under resolution, its subsidiaries, a bridge institution or an asset management vehicle; (c) to purchase assets of the institution under resolution; (d) to make contributions to a bridge institution and an asset management vehicle; (e) to pay compensation to shareholders or creditors if, following an evaluation pursuant to Article 20(5) they have incurred greater losses that they would have incurred, following a valuation pursuant to Article 20(16), in a winding up under normal insolvency proceedings; (f) to make a contribution to the institution under resolution in lieu of the write-down or conversion of liabilities of certain creditors, when the bail-in tool is applied and the decision is made to exclude certain creditors from the scope of bail-in in accordance with Article 27(5); (g) to take any combination of the actions referred to in points (a) to (f). 2. The Fund may be used to take the actions referred to in paragraph 1 also with respect to the purchaser in the context of the sale of business tool. 3. The Fund shall not be used directly to absorb the losses of an entity referred to in Article 2 or to recapitalise such an entity. In the event that the use of the Fund for the purposes in paragraph 1of this Article indirectly results in part of the losses of an entity referred to in Article 2 being passed on to the Fund, the principles governing the use of the Fund set out in Article 27 shall apply. 4. The Board may not hold the capital contributed to in accordance with point (f) of paragraph 1 for a period exceeding five years.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU 1 (the Bank Recovery and Resolution Directive or BRRD) and to Regulation (EU) No 806/2014 2 (the Single Resolution Mechanism Regulation or SRMR) are part of the crisis management and deposit insurance legislative package that also includes additional amendments to those acts and to Directive 2014/49/EU 3 (the Deposit Guarantee Schemes Directive or DGSD). The EU crisis management framework is well-established, however, recent episodes of bank failures have shown that there is need for improvements. The aim of the CMDI reform is to build on the objectives of the crisis management framework and to ensure a more consistent approach to resolution, so that any bank in crisis can exit the market in an orderly manner, while preserving financial stability, taxpayer money and ensuring depositor confidence. In particular, the existing resolution framework for smaller and medium-sized banks needs to be strengthened with respect to its design, implementation and, most importantly, incentives for its application, so that it can be more credibly applied to those banks. In the aftermath of the global financial and sovereign debt crises, the EU took decisive actions, in line with international calls for reform, to create a safer financial sector for the EU single market. This included providing authorities with the tools and powers to handle the failure of any bank in an orderly manner while preserving financial stability, public finances and depositor protection. T he EU framework was reformed largely based on global standards agreed with the EU’s international partners. I t consist s of four main EU legislative texts adopted in 2013 and 2014 acting together with relevant national legislation : a regulation and a directive on prudential requirements for and supervision of institutions ( the Capital Requirements Regulation ( CRR 4 ) and the Capital Requirements Directive ( CRD 5 ) ), the BRRD and the SRMR. The 2019 banking package revised the legislation by including measures delivering on the EU’s commitments made in international fora 6 to take further steps towards completing the Banking Union by providing credible risk reduction measures to mitigate threats to financial stability. T he main revision s concerned (i) the implementation in the EU of the international ‘Total Loss-absorbing Capacity (TLAC) Term Sheet ’ , published by the Financial Stability Board on 9 November 2015 (the ‘TLAC standard’) 7 , for global systemically important banks, referred to in the EU legislation as global systemically important institutions ; and (ii) the amendment of the minimum requirement for own funds and eligible liabilities (MREL) set out in BRRD and SRMR . The objective of these reforms was to ensure that the loss absorption and recapitalisation of banks, when those banks become financially unviable and are subsequently placed in resolution, would occur through private means. The revision also clarified the application of MREL at the level of subsidiaries within banking groups by introducing the concept of ‘internal MREL’ in line with a similar concept included in the TLAC standard. These requirements aim to ensure that internal arrangements are in place between group entities to transfer losses from group entities to the resolution entity, i.e. typically the parent undertaking, without placing the group entities into formal resolution, which could potentially have disruptive effects on the market. To implement this mechanism, group entities are required, based on the decision of the resolution authorities, to issue eligible liabilities that should be subscribed directly or indirectly by the resolution entity. The EU MREL framework was further amended by Regulation (EU) 2022/2036 of the European Parliament and of the Council 8 , which established methods for the indirect subscription of instruments eligible for meeting the internal MREL. On the basis of a technical assessment by the EBA pursuant to a mandate set out in Article 45f(6) BRRD , t he regulation introduced a deduction mechanism for the indirect subscriptions of internal MREL through intermediate entities in a chain of ownership (i.e. between the ultimate subsidiary and the resolution entity) to ensure the effective application of internal loss transfer s in the MREL framework. Under this mechanism, referred to as a full holdings-based deduction approach, intermediate entities are required to deduct from their own internal MREL capacity the holdings of internal MREL eligible instruments issued by other entities tha t are part of the same resolution group . The text also specifies that intermediate entities complying with internal MREL on a consolidated basis are exempted from the obligation to deduct their holdings of instruments issued by the entities included in the consolidation . This approach was preferred to a requirement-based deduction approach where the amount of deductions required of the intermediate entities would be limited by a cap corresponding to the level of the internal MREL of the issuing entity belonging to the same resolution group. Regulation (EU) 2022/2036 also mandated the Commission to review the implementation of the deduction approach for indirect subscription of internal MREL eligible resources across the different types of banking group structures, to assess any potential unintended consequences of the new deduction mechanism and to ensure proportionate treatment and a level playing field, particularly with regard to chains of ownership that include an operating company between a parent holding company and its subsidiaries (‘holdco structures’ in opposition to ‘opco structures’, where the parent entity is not a holding company). The Commission was asked to assess: (i) the possibility of allowing compliance with internal MREL on a consolidated basis in additional situations; (ii) the treatment of entities whose resolution plan provides that they are to be wound up under normal insolvency proceedings (‘liquidation entities’); and (iii) the appropriateness of limiting the deductions to an amount equivalent to the internal MREL of the issuing entity. Based on an analysis of the deduction mechanism introduced in the Regulation and a quantitative impact assessment using data provided by the Single Resolution Board (SRB), the Commission found that targeted amendments to the BRRD and the SRMR with respect to the scope of application of internal MREL requirements and the treatment of liquidation entities are necessary and appropriate. The proposed amendments will contribute to the resolvability of banks by improving the functioning and proportionality of the deduction mechanism, and will ensure that it does not create level playing field issues between different banking group structures. Given that the corresponding provisions are already in force and will become applicable in the EU on 1 January 2024, the proposed amendments need to be made in a timely manner. The need for speedy adoption is further amplified by the fact that banking groups need clarity on the deduction mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline, also set on 1 January 2024. 
Revised version (Article 76 Mission of the Fund):
2. The Fund may be used to take the actions referred to in paragraph 1 also with respect to the purchaser in the context of the sale of business tool. 3. The Fund shall not be used directly to absorb the losses of an entity referred to in Article 2 or to recapitalise such an entity. In the event that the use of the Fund for the purposes in paragraph 1of this Article indirectly results in part of the losses of an entity referred to in Article 2 being passed on to the Fund, the principles governing the use of the Fund set out in Article 27 shall apply. 4. The Board may not hold the capital contributed to in accordance with point (f) of paragraph 1 for a period exceeding five years.
Article 77 Use of the Fund
The use of the Fund shall be contingent upon the Agreement whereby the participating Member States agree to transfer to the Fund the contributions that they raise at national level in accordance with this Regulation and with Directive 2014/59/EU and shall comply with the principles laid down in that Agreement. Accordingly, until the Fund reaches the target level referred to in Article 69, but until no later than eight years after the date of application of this Article, the Board shall use the Fund in accordance with principles founded on a division of the Fund into national compartments corresponding to each participating Member State, as well as on a progressive merger of the different funds raised at national level to be allocated to national compartments of the Fund, as laid down in the Agreement.
Article 78 Mutualisation of national financing arrangements in the case of group resolution involving institutions in non-participating Member States
In the case of a group resolution involving institutions established in one or more participating Member States on the one hand, and institutions established in one or more non-participating Member States on the other hand, the Fund shall contribute to the financing of the group resolution in accordance with the provisions laid down in Article 107(2) to (5) of Directive 2014/59/EU.
Article 79 Use of deposit guarantee schemes in the context of resolution
1. Participating Member States shall ensure that when the Board takes resolution action, provided that that action ensures that depositors continue to have access to their deposits, the deposit guarantee scheme to which the institution is affiliated shall be liable for the amounts specified in Article 109(1) and (4) of Directive 2014/59/EU. The relevant deposit guarantee scheme shall subrogate to the rights and obligations of covered depositors in liquidation proceedings for an amount equal to its payment. 2. The determination of the amount by which the deposit guarantee scheme is liable in accordance with paragraph 1 of this Article shall comply with the conditions referred to in Article 20. 3. Before deciding, in accordance with paragraph 2 of this Article, the amount by which the deposit guarantee scheme is liable, the Board shall consult the concerned designated authority within the meaning of Article 2(1)(18) of Directive 2014/49/EU, taking fully into account the urgency of the matter. 4. Where eligible deposits at an institution under resolution are transferred to another entity through the sale of business tool or the bridge institution tool, the depositors have no claim under Directive 2014/49/EU against the deposit guarantee scheme in relation to any part of their deposits at the institution under resolution that are not transferred, provided that the amount of funds transferred is equal to or more than the aggregate coverage level provided for in Article 6 of that Directive. 5. Notwithstanding paragraphs 1 to 4, if the available financial means of a deposit guarantee scheme are used in accordance therewith and are subsequently reduced to less than two-thirds of the target level of the deposit guarantee scheme, the regular contribution to the deposit guarantee scheme shall be set at a level allowing for reaching the target level within six years. The liability of a deposit guarantee scheme shall not be greater than the amount equal to 50 % of its target level pursuant to Article 10(2) of Directive 2014/49/EU. In any circumstances, the deposit guarantee scheme's participation under this Regulation shall not exceed the losses it would have incurred in a winding up under normal insolvency proceedings.
Article 80 Privileges and Immunities
Protocol No 7 on the Privileges and Immunities of the European Union annexed to the TEU and to the TFEU shall apply to the Board and its staff.
Article 81 Language arrangements
1. Council Regulation No 1 ( 23 ) shall apply to the Board. 2. The Board shall decide on the internal language arrangements for the Board. 3. The Board may decide which of the official languages to use when sending documents to Union institutions or bodies. 4. The Board may agree with each national resolution authority on the language or languages in which the documents to be sent to or by the national resolution authorities shall be drafted. 5. The translation services required for the functioning of the Board shall be provided by the Translation Centre of the bodies of the European Union.
Article 82 Staff
1. The Staff Regulations, the Conditions of Employment and the rules adopted jointly by the Union institutions, for the purpose of applying them shall apply to the staff of the Board. By way of derogation from the first subparagraph, the Chair, the Vice-Chair and the four members referred to in Article 43(1)(b) shall, respectively, be on a par with a Vice-President, Judge and Registrar of the Court of Justice regarding emoluments and pensionable age, as defined in Regulation (EC) No 422/67/EEC, 5/67/Euratom of the Council ( 24 ) . They shall not be subject to a maximum retirement age. For aspects not covered by this Regulation or by Regulation (EC) No 422/67/EEC, 5/67/Euratom, the Staff Regulations and the Conditions of Employment shall apply by analogy. 2. The Board, in agreement with the Commission, shall adopt the necessary implementing measures, in accordance with the arrangements provided for in Article 110 of the Staff Regulations. 3. In respect of its staff, the Board shall exercise the powers conferred on the appointing authority by the Staff Regulations and on the authority entitled to conclude contracts by the Conditions of Employment.
Article 83 Staff exchange
1. The Board may make use of seconded national experts or other staff not employed by the Board. 2. The Board in its plenary session shall adopt appropriate decisions laying down rules on the exchange and secondment of staff from and among the national resolution authorities to the Board. 3. The Board may establish internal resolution teams composed of its own staff and staff of the national resolution authorities, as well as observers from non-participating Member States' resolution authorities, where appropriate. 4. Where the Board establishes internal resolution teams as provided for in paragraph 3 of this Article, it shall appoint coordinators of those teams from its own staff. In accordance with Article 51(3), the coordinators may be invited as observers to attend the meetings of the executive session of the Board in which the members appointed by the respective Member States participate in accordance with Article 53(3) and (4).
Article 84 Internal committees
The Board may establish internal committees to provide it with advice and guidance on the discharge of its functions under this Regulation.
Article 85 Appeal Panel
1. The Board shall establish an Appeal Panel for the purposes of deciding on appeals submitted in accordance with paragraph 3. 2. The Appeal Panel shall be composed of five individuals of high repute, from the Member States and with a proven record of relevant knowledge and professional experience, including resolution experience, to a sufficiently high level in the fields of banking or other financial services, excluding current staff of the Board, as well as current staff of resolution authorities or other national or Union institutions, bodies, offices and agencies who are involved in performing the tasks conferred on the Board by this Regulation. The Appeal Panel shall have sufficient resources and expertise to provide expert legal advice on the legality of the Board's exercise of its powers. Members of the Appeal Panel and two alternates shall be appointed by the Board for a term of five years, which may be extended once, following a public call for expressions of interest published in the Official Journal of the European Union . They shall not be bound by any instructions. 3. Any natural or legal person, including resolution authorities, may appeal against a decision of the Board referred to in Article 10(10), Article 11, Article 12(1), Articles 38 to 41, Article 65(3), Article 71 and Article 90(3) which is addressed to that person, or which is of direct and individual concern to that person. The appeal, together with a statement of grounds, shall be filed in writing at the Appeal Panel within six weeks of the date of notification of the decision to the person concerned, or, in the absence of a notification, of the day on which the decision came to the knowledge of the person concerned. 4. The Appeal Panel shall decide upon the appeal within one month after the appeal has been lodged. The Appeal Panel shall decide on the basis of a majority of at least three of its five members. 5. The members of the Appeal Panel shall act independently and in the public interest. For that purpose, they shall make a public declaration of commitments and a public declaration of interests indicating any direct or indirect interest which might be considered to be prejudicial to their independence or the absence of any such interest. 6. An appeal lodged pursuant to paragraph 3 shall not have suspensive effect. However, the Appeal Panel may, if it considers that circumstances so require, suspend the application of the contested decision. 7. If the appeal is admissible, the Appeal Panel shall examine whether it is well founded. It shall invite the parties to the appeal proceedings to file observations on its own notifications or on communications from the other parties to the appeal proceedings, within specified time limits. Parties to the appeal proceedings shall be entitled to make oral representations. 8. The Appeal Panel may confirm the decision taken by the Board, or remit the case to the latter. The Board shall be bound by the decision of Appeal Panel and it shall adopt an amended decision regarding the case concerned. 9. The decisions of the Appeal Panel shall be reasoned and notified to the parties. 10. The Appeal Panel shall adopt and make public its rules of procedure.
Article 86 Actions before the Court of Justice
1. Proceedings may be brought before the Court of Justice in accordance with Article 263 TFEU contesting a decision taken by the Appeal Panel or, where there is no right of appeal to the Appeal Panel, by the Board. 2. Member States and the Union institutions, as well as any natural or legal person, may institute proceedings before the Court of Justice against decisions of the Board, in accordance with Article 263 TFEU. 3. In the event that the Board has an obligation to act and fails to take a decision, proceedings for failure to act may be brought before the Court of Justice in accordance with Article 265 TFEU. 4. The Board shall take the necessary measures to comply with the judgment of the Court of Justice.
Article 87 Liability of the Board
1. The Board's contractual liability shall be governed by the law applicable to the contract in question. 2. The Court of Justice shall have jurisdiction to give judgement pursuant to any arbitration clause contained in a contract concluded by the Board. 3. In the case of non-contractual liability, the Board shall, in accordance with the general principles common to the laws concerning the liability of public authorities of the Member States, make good any damage caused by it or by its staff in the performance of their duties, in particular their resolution functions, including acts and omissions in support of foreign resolution proceedings. 4. The Board shall compensate a national resolution authority for the damages which it has been ordered to pay by a national court, or which it has, in agreement with the Board, undertaken to pay pursuant to an amicable settlement, which are the consequences of an act or omission committed by that national resolution authority in the course of any resolution under this Regulation of entities and groups referred to in Article 7(2), and of entities and groups referred to in Article 7(4)(b) and (5) where the conditions for the application of those paragraphs are met or pursuant to the second subparagraph of Article 7(3). That obligation shall not apply where that act or omission constituted an infringement of this Regulation, of another provision of Union law, of a decision of the Board, of the Council, or of the Commission, committed intentionally or with manifest and serious error of judgement. 5. The Court of Justice shall have jurisdiction in any dispute relating to paragraphs 3 and 4. Proceedings in matters arising from non-contractual liability shall be barred after a period of five years from the occurrence of the event giving rise thereto. 6. The personal liability of its staff towards the Board shall be governed by the provisions laid down in the Staff Regulations or Conditions of Employment applicable to them.
Article 88 Professional secrecy and exchange of information
1. Members of the Board, the Vice-Chair, the members of the Board referred to in Article 43(1)(b), the staff of the Board and staff exchanged with or seconded by participating Member States carrying out resolution duties shall be subject to the requirements of professional secrecy pursuant to Article 339 TFEU and the relevant provisions in Union legislation, even after their duties have ceased. They shall in particular be prohibited from disclosing confidential information received during the course of their professional activities or from a competent authority or resolution authority in connection with their functions under this Regulation, to any person or authority, unless it is in the exercise of their functions under this Regulation or in summary or collective form such that entities referred to in Article 2 cannot be identified or with the express and prior consent of the authority or the entity which provided the information. Information subject to the requirements of professional secrecy shall not be disclosed to another public or private entity except where such disclosure is due for the purpose of legal proceedings. Those requirements shall also apply to potential purchasers contacted in order to prepare for the resolution of an entity pursuant to Article 13(3). 2. The Board shall ensure that individuals who provide any service, directly or indirectly, permanently or occasionally, relating to the discharge of its duties, including officials and other persons authorised by the Board or appointed by the national resolution authorities to conduct on-site inspections, are subject to the requirements of professional secrecy equivalent to those referred to in paragraph 1. 3. The requirements of professional secrecy referred to in paragraph 1 shall also apply to observers who attend the Board's meetings and to observers from non-participating Member States who take part in internal resolution teams in accordance with Article 83(3). 4. The Board shall take the necessary measures to ensure the safe handling and processing of confidential information. 5. Before any information is disclosed, the Board shall ensure that it does not contain confidential information, in particular, by assessing the effects that the disclosure could have on the public interest as regards financial, monetary or economic policy, on the commercial interests of natural and legal persons, on the purpose of inspections, on investigations and on audits. The procedure for checking the effects of disclosing information shall include a specific assessment of the effects of any disclosure of the contents and details of resolution plans as referred to in Articles 8 and 9, the result of any assessment carried out under Article 10 or the resolution scheme referred to in Article 18. 6. This Article shall not prevent the Board, the Council, the Commission, the ECB, the national resolution authorities or the national competent authorities, including their employees and experts, from sharing information with each other and with competent ministries, central banks, deposit guarantee schemes, investor compensation schemes, authorities responsible for normal insolvency proceedings, resolution and competent authorities from non-participating Member States, EBA, or, subject to Article 33, third-country authorities that carry out functions equivalent to those of a resolution authority, or, subject to strict confidentiality requirements, with a potential purchaser for the purposes of planning or carrying out a resolution action.
Article 89 Data protection
This Regulation shall be without prejudice to the obligations of Member States relating to their processing of personal data under Directive 95/46/EC of the European Parliament and of the Council ( 25 ) or the obligations of the Board, the Council and the Commission relating to their processing of personal data under Regulation (EC) No 45/2001 of the European Parliament and of the Council ( 26 ) when fulfilling their responsibilities.
Article 90 Access to documents
1. Regulation (EC) No 1049/2001 of the European Parliament and of the Council ( 27 ) shall apply to documents held by the Board. 2. The Board shall, within six months of the date of its first meeting, adopt the practical measures for applying Regulation (EC) No 1049/2001. 3. Decisions taken by the Board under Article 8 of Regulation (EC) No 1049/2001 may be the subject of a complaint to the European Ombudsman or of proceedings before the Court of Justice, following an appeal to the Appeal Panel, referred to in Article 85 of this Regulation, as appropriate, under the conditions laid down in Articles 228 and 263 TFEU respectively. 4. Persons who are the subject of the Board's decisions shall be entitled to have access to the Board's file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or internal preparatory documents of the Board.
Article 91 Security rules on the protection of classified and sensitive non-classified information
The Board shall apply the security principles contained in the Commission's security rules for protecting European Union Classified Information (EUCI) and sensitive non-classified information, as set out in the Annex to Commission Decision 2001/844/EC, ECSC, Euratom ( 28 ) . Applying the security principles shall include applying provisions for the exchange, processing and storage of such information.
Article 92 Court of Auditors
1. The Court of Auditors shall produce a special report for each 12-month period, starting on 1 April each year. 2. Each report shall examine whether: (a) sufficient regard was had to economy, efficiency and effectiveness with which the Fund has been used, in particular the need to minimise the use of the Fund; (b) the assessment of Fund aid was efficient and rigorous. 3. Each report under paragraph 1 shall be produced within six months of the end of the period to which the report relates. 4. Following consideration of the final accounts prepared by the Board in accordance with Article 63, the Court of Auditors shall prepare a report on its findings by 1 December following each financial year. The Court of Auditors shall, in particular, report on any contingent liabilities (whether for the Board, the Council, the Commission or otherwise) arising as a result of the performance by the Board, the Council and the Commission of their tasks under this Regulation. 5. The European Parliament and the Council may request that the Court of Auditors examine any other relevant matters falling within their competence set out in Article 287(4) TFEU. 6. The reports referred to in paragraphs 1 and 4 shall be sent to the Board, the European Parliament, the Council and the Commission and shall be made public without delay. 7. Within two months of the date on which each report under paragraph 1 is made public the Commission shall provide a detailed written response which shall be made public. Within two months of the date on which each report under paragraph 4 is made public the Board, the Council and the Commission shall each provide a detailed written response which shall be made public. 8. The Court of Auditors shall have the power to obtain from the Board, the Council and the Commission any information relevant for performing the tasks conferred on it by this Article. The Board, the Council and the Commission shall provide any relevant information requested within such a timeframe as may be specified by the Court of Auditors.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal T he proposed amendments to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities (MREL), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks (G-SIBs), referred to as global systemically important institutions (G-SIIs) in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD and SRMR frameworks remain valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any future requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution-specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and making it more resilient. This proposal covers specifically the targeted amendments to the SRMR related to the implementation of the TLAC standard in the Union. This proposal will apply to the Single Resolution Board (SRB) and national authorities of the Member States participating in the Single Resolution Mechanism (SRM) when they set and implement the requirements on loss absorbing and recapitalisation capacity of financial firms established in the Banking Union.
Revised version (Article 92 Court of Auditors):
1. The Court of Auditors shall produce a special report for each 12-month period, starting on 1 April each year. 2. Each report shall examine whether: (a) sufficient regard was had to economy, efficiency and effectiveness with which the Fund has been used, in particular the need to minimise the use of the Fund; (b) the assessment of Fund aid was efficient and rigorous. Each report shall examine whether: (a) sufficient regard was had to economy, efficiency and effectiveness with which the Fund has been used, in particular the need to minimise the use of the Fund; (b) the assessment of Fund aid was efficient and rigorous. 3. Each report under paragraph 1 shall be produced within six months of the end of the period to which the report relates. 4. Following consideration of the final accounts prepared by the Board in accordance with Article 63, the Court of Auditors shall prepare a report on its findings by 1 December following each financial year. The Court of Auditors shall, in particular, report on any contingent liabilities (whether for the Board, the Council, the Commission or otherwise) arising as a result of the performance by the Board, the Council and the Commission of their tasks under this Regulation. 5. The European Parliament and the Council may request that the Court of Auditors examine any other relevant matters falling within their competence set out in Article 287(4) TFEU. 6. The reports referred to in paragraphs 1 and 4 shall be sent to the Board, the European Parliament, the Council and the Commission and shall be made public without delay. 7. Within two months of the date on which each report under paragraph 1 is made public the Commission shall provide a detailed written response which shall be made public. Within two months of the date on which each report under paragraph 4 is made public the Board, the Council and the Commission shall each provide a detailed written response which shall be made public. 8. The Court of Auditors shall have the power to obtain from the Board, the Council and the Commission any information relevant for performing the tasks conferred on it by this Article. The Board, the Council and the Commission shall provide any relevant information requested within such a timeframe as may be specified by the Court of Auditors.
Article 93 Exercise of the delegation
1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The delegation of power referred to in Article 19(8), Article 65(5), Article 69(5), Article 71(3) and Article 75(4) shall be conferred for an indeterminate period of time from the relevant dates referred to in Article 99. 3. The Commission shall ensure consistency between delegated acts adopted pursuant to this Regulation and delegated acts adopted pursuant to Directive 2014/59/EU. 4. The delegation of power referred to in Article 19(8), Article 65(5), Article 69(5), Article 71(3) and Article 75(4) may be revoked at any time by the European Parliament or by the Council. A decision of revocation shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Article 19(8), Article 65(5), Article 69(5), Article 71(3) and Article 75(4) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or the Council. 7. The Commission shall not adopt delegated acts where the scrutiny time of the European Parliament is reduced through recess to less than five months, including any extension.
Article 94 Review
1. By 31 December 2018, and every three years thereafter, the Commission shall publish a report on the application of this Regulation, with a special emphasis on monitoring the potential impact on the smooth functioning of the internal market. That report shall evaluate: (a) the functioning of the SRM, its cost efficiency, as well as the impact of its resolution activities on the interests of the Union as a whole and on the coherence and integrity of the internal market for financial services, including its possible impact on the structures of the national banking systems within the Union, in comparison with other banking systems, and regarding the effectiveness of cooperation and information sharing arrangements within the SRM, between the SRM and the SSM, and between the SRM, national resolution authorities, competent authorities and resolution authorities of non-participating Member States, in particular assessing whether: (i) there is a need that the functions allocated by this Regulation to the Board, to the Council and to the Commission, be exercised exclusively by an independent Union institution and, if so, whether any changes of the relevant provisions are necessary including at the level of primary law; (ii) cooperation between the SRM, the SSM, the ESRB, EBA, ESMA and EIOPA, and the other authorities which form part of the ESFS, is appropriate; (iii) the investment portfolio in accordance with Article 75 is made of sound and diversified assets; (iv) the link between sovereign debt and banking risk has been broken; (v) governance arrangements, including the division of tasks within the Board and the composition of the voting arrangements both in the executive and the plenary sessions of the Board and its relations with the Commission and the Council are appropriate; (vi) the reference point for setting the target level for the Fund is adequate and in particular, whether covered deposits or total liabilities is a more appropriate basis and if a minimum absolute amount for the Fund should be established in order to avoid volatility in the flow of financial means to the Fund and to ensure the stability and adequacy of the financing of the Fund over time; (vii) it is necessary to modify the target level established for the Fund and the level of contributions in order to ensure a level playing field within the Union; (b) the effectiveness of independence and accountability arrangements; (c) the interaction between the Board and EBA; (d) the interaction between the Board and the national resolution authorities of non-participating Member States and the effects of the SRM on those Member States, and the interaction between the Board and relevant third-country authorities as defined in Article 2(1)(90) of Directive 2014/59/EU; (e) the necessity of taking steps in order to harmonise insolvency proceedings for failed institutions. 2. The report shall be submitted to the European Parliament and to the Council. The Commission shall make accompanying proposals, as appropriate. 3. When reviewing Directive 2014/59/EU, the Commission is invited also to review this Regulation, as appropriate.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The proposed amendments to Directive 2014/59/EU 1 (the Bank Recovery and Resolution Directive or BRRD) and to Regulation (EU) No 806/2014 2 (the Single Resolution Mechanism Regulation or SRMR) are part of the crisis management and deposit insurance legislative package that also includes additional amendments to those acts and to Directive 2014/49/EU 3 (the Deposit Guarantee Schemes Directive or DGSD). The EU crisis management framework is well-established, however, recent episodes of bank failures have shown that there is need for improvements. The aim of the CMDI reform is to build on the objectives of the crisis management framework and to ensure a more consistent approach to resolution, so that any bank in crisis can exit the market in an orderly manner, while preserving financial stability, taxpayer money and ensuring depositor confidence. In particular, the existing resolution framework for smaller and medium-sized banks needs to be strengthened with respect to its design, implementation and, most importantly, incentives for its application, so that it can be more credibly applied to those banks. In the aftermath of the global financial and sovereign debt crises, the EU took decisive actions, in line with international calls for reform, to create a safer financial sector for the EU single market. This included providing authorities with the tools and powers to handle the failure of any bank in an orderly manner while preserving financial stability, public finances and depositor protection. T he EU framework was reformed largely based on global standards agreed with the EU’s international partners. I t consist s of four main EU legislative texts adopted in 2013 and 2014 acting together with relevant national legislation : a regulation and a directive on prudential requirements for and supervision of institutions ( the Capital Requirements Regulation ( CRR 4 ) and the Capital Requirements Directive ( CRD 5 ) ), the BRRD and the SRMR. The 2019 banking package revised the legislation by including measures delivering on the EU’s commitments made in international fora 6 to take further steps towards completing the Banking Union by providing credible risk reduction measures to mitigate threats to financial stability. T he main revision s concerned (i) the implementation in the EU of the international ‘Total Loss-absorbing Capacity (TLAC) Term Sheet ’ , published by the Financial Stability Board on 9 November 2015 (the ‘TLAC standard’) 7 , for global systemically important banks, referred to in the EU legislation as global systemically important institutions ; and (ii) the amendment of the minimum requirement for own funds and eligible liabilities (MREL) set out in BRRD and SRMR . The objective of these reforms was to ensure that the loss absorption and recapitalisation of banks, when those banks become financially unviable and are subsequently placed in resolution, would occur through private means. The revision also clarified the application of MREL at the level of subsidiaries within banking groups by introducing the concept of ‘internal MREL’ in line with a similar concept included in the TLAC standard. These requirements aim to ensure that internal arrangements are in place between group entities to transfer losses from group entities to the resolution entity, i.e. typically the parent undertaking, without placing the group entities into formal resolution, which could potentially have disruptive effects on the market. To implement this mechanism, group entities are required, based on the decision of the resolution authorities, to issue eligible liabilities that should be subscribed directly or indirectly by the resolution entity. The EU MREL framework was further amended by Regulation (EU) 2022/2036 of the European Parliament and of the Council 8 , which established methods for the indirect subscription of instruments eligible for meeting the internal MREL. On the basis of a technical assessment by the EBA pursuant to a mandate set out in Article 45f(6) BRRD , t he regulation introduced a deduction mechanism for the indirect subscriptions of internal MREL through intermediate entities in a chain of ownership (i.e. between the ultimate subsidiary and the resolution entity) to ensure the effective application of internal loss transfer s in the MREL framework. Under this mechanism, referred to as a full holdings-based deduction approach, intermediate entities are required to deduct from their own internal MREL capacity the holdings of internal MREL eligible instruments issued by other entities tha t are part of the same resolution group . The text also specifies that intermediate entities complying with internal MREL on a consolidated basis are exempted from the obligation to deduct their holdings of instruments issued by the entities included in the consolidation . This approach was preferred to a requirement-based deduction approach where the amount of deductions required of the intermediate entities would be limited by a cap corresponding to the level of the internal MREL of the issuing entity belonging to the same resolution group. Regulation (EU) 2022/2036 also mandated the Commission to review the implementation of the deduction approach for indirect subscription of internal MREL eligible resources across the different types of banking group structures, to assess any potential unintended consequences of the new deduction mechanism and to ensure proportionate treatment and a level playing field, particularly with regard to chains of ownership that include an operating company between a parent holding company and its subsidiaries (‘holdco structures’ in opposition to ‘opco structures’, where the parent entity is not a holding company). The Commission was asked to assess: (i) the possibility of allowing compliance with internal MREL on a consolidated basis in additional situations; (ii) the treatment of entities whose resolution plan provides that they are to be wound up under normal insolvency proceedings (‘liquidation entities’); and (iii) the appropriateness of limiting the deductions to an amount equivalent to the internal MREL of the issuing entity. Based on an analysis of the deduction mechanism introduced in the Regulation and a quantitative impact assessment using data provided by the Single Resolution Board (SRB), the Commission found that targeted amendments to the BRRD and the SRMR with respect to the scope of application of internal MREL requirements and the treatment of liquidation entities are necessary and appropriate. The proposed amendments will contribute to the resolvability of banks by improving the functioning and proportionality of the deduction mechanism, and will ensure that it does not create level playing field issues between different banking group structures. Given that the corresponding provisions are already in force and will become applicable in the EU on 1 January 2024, the proposed amendments need to be made in a timely manner. The need for speedy adoption is further amplified by the fact that banking groups need clarity on the deduction mechanism to decide how best to preposition their internal MREL capacity in view of the general MREL compliance deadline, also set on 1 January 2024. 
Revised version (Article 94 Review):
2. The report shall be submitted to the European Parliament and to the Council. The Commission shall make accompanying proposals, as appropriate. 3. When reviewing Directive 2014/59/EU, the Commission is invited also to review this Regulation, as appropriate.
Article 95 Amendment to Regulation (EU) No 1093/2010
Regulation (EU) No 1093/2010 is amended as follows: (1) In Article 4, point (2) is replaced by the following: ‘(2) “competent authorities” means: (i) competent authorities as defined in point (40) of Article 4(1) of Regulation (EU) No 575/2013, including the European Central Bank with regard to matters relating to the tasks conferred on it by Regulation (EU) No 1024/2013, in Directive 2007/64/EC, and as referred to in Directive 2009/110/EC; (ii) with regard to Directives 2002/65/EC and 2005/60/EC, the authorities competent for ensuring compliance with the requirements of those Directives by credit and financial institutions; (iii) with regard to deposit guarantee schemes, bodies which administer deposit guarantee schemes pursuant to Directive 2014/49/EU of the European Parliament and of the Council ( *1 ) , or, where the operation of the deposit guarantee scheme is administered by a private company, the public authority supervising those schemes pursuant to that Directive; and (iv) with regard to Directive 2014/59/EU of the European Parliament and of the Council ( *2 ) and to Regulation (EU) No 806/2014 of the European Parliament and of the Council ( *3 ) , the resolution authorities, defined in Article 3 of Directive 2014/59/EU, the Single Resolution Board, established by Regulation (EU) No 806/2014, and the Council and the Commission when taking actions under Article 18 of Regulation (EU) No 806/2014, except where they exercise discretionary powers or make policy choices. ( *1 ) Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee scheme ( OJ L 173, 12.6.2014, p. 149 )." ( *2 ) Directive 2014/59/EU of the European Parliament and of 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/EEC, and Directives 2001/24/EC, 2002/47/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 of the Council ( OJ L 173, 12.6.2014, p. 190 )." ( *3 ) Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 ( OJ L 225, 30.7.2014, p. 1 ).’;"
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal T he proposed amendments to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities (MREL), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks (G-SIBs), referred to as global systemically important institutions (G-SIIs) in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD and SRMR frameworks remain valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any future requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution-specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and making it more resilient. This proposal covers specifically the targeted amendments to the SRMR related to the implementation of the TLAC standard in the Union. This proposal will apply to the Single Resolution Board (SRB) and national authorities of the Member States participating in the Single Resolution Mechanism (SRM) when they set and implement the requirements on loss absorbing and recapitalisation capacity of financial firms established in the Banking Union.
Revised version (Article 95 Amendment to Regulation (EU) No 1093/2010):
Regulation (EU) No 1093/2010 is amended as follows: In Article 4, point (2) is replaced by the following: ‘(2) “competent authorities” means: (ii) with regard to Directives 2002/65/EC and 2005/60/EC, the authorities competent for ensuring compliance with the requirements of those Directives by credit and financial institutions; (iii) with regard to deposit guarantee schemes, bodies which administer deposit guarantee schemes pursuant to Directive 2014/49/EU of the European Parliament and of the Council ( *1 ), or, where the operation of the deposit guarantee scheme is administered by a private company, the public authority supervising those schemes pursuant to that Directive; and In Article 25, the following paragraph is inserted: ‘1a. The Authority may organise and conduct peer reviews of the exchange of information and of the joint activities of the Board referred to in Regulation (EU) No 806/2014 and national resolution authorities of Member States non-participating in the Single Resolution Mechanism in the resolution of cross-border groups to strengthen effectiveness and consistency in outcomes. To that end, the Authority shall develop methods to allow for objective assessment and comparison.’; In Article 40(6), the following subparagraph is added: ‘For the purpose of acting within the scope of Directive 2014/59/EU, the Chair of the Single Resolution Board shall be an observer to the Board of Supervisors.’.
Article 96 Replacement of national resolution financing arrangements
From the date of application referred to in Article 99(2) and (6) of this Regulation, the Fund shall be considered to be the resolution financing arrangement of the participating Member States under Articles 99 to 109 of Directive 2014/59/EU.
Article 97 Headquarters Agreement and operating conditions
1. The necessary arrangements concerning the accommodation to be provided for the Board in the Member State where its seat is located and the facilities to be made available by that Member State, as well as the specific rules applicable in that Member State to the Chair, members of the Board in its plenary session, Board staff and members of their families shall be laid down in a Headquarters Agreement between the Board and that Member State, concluded after obtaining the approval of the Board in its plenary session and no later than 20 August 2016. 2. The Member State where the Board's seat is located shall provide the best possible conditions to ensure the proper functioning of the Board, including multilingual, European-oriented schooling and appropriate transport connections.
Article 98 Start of the Board's activities
1. The Board shall become fully operational by 1 January 2015. 2. The Commission shall be responsible for the establishment and initial operation of the Board until the Board has the operational capacity to implement its own budget. For that purpose: (a) until the Chair takes up his or her duties following his or her appointment by the Council in accordance with Article 56, the Commission may designate a Commission official to act as interim Chair and exercise the duties assigned to the Chair; (b) by way of derogation from Article 50(1)(l) and until the adoption of a decision as referred to in Article 50(3), the interim Chair shall exercise the appointing authority powers; (c) the Commission may offer assistance to the Board, in particular by seconding Commission officials to carry out the activities of the agency under the responsibility of the interim Chair or the Chair. 3. The interim Chair may authorise all payments covered by appropriations entered in the Board's budget and may conclude contracts, including staff contracts.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal T he proposed amendments to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities (MREL), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks (G-SIBs), referred to as global systemically important institutions (G-SIIs) in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD and SRMR frameworks remain valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any future requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution-specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and making it more resilient. This proposal covers specifically the targeted amendments to the SRMR related to the implementation of the TLAC standard in the Union. This proposal will apply to the Single Resolution Board (SRB) and national authorities of the Member States participating in the Single Resolution Mechanism (SRM) when they set and implement the requirements on loss absorbing and recapitalisation capacity of financial firms established in the Banking Union.
Revised version (Article 98 Start of the Board's activities):
1. The Board shall become fully operational by 1 January 2015. The Commission shall be responsible for the establishment and initial operation of the Board until the Board has the operational capacity to implement its own budget. For that purpose: (a) until the Chair takes up his or her duties following his or her appointment by the Council in accordance with Article 56, the Commission may designate a Commission official to act as interim Chair and exercise the duties assigned to the Chair; (c) the Commission may offer assistance to the Board, in particular by seconding Commission officials to carry out the activities of the agency under the responsibility of the interim Chair or the Chair. 3. The interim Chair may authorise all payments covered by appropriations entered in the Board's budget and may conclude contracts, including staff contracts.
Article 99 Entry into force
1. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union . 2. With the exceptions set out in paragraphs 3 to 5, this Regulation shall be applicable from 1 January 2016. 3. By way of derogation from paragraph 2 of this Article, the provisions relating to the powers of the Board to collect information and cooperate with the national resolution authorities for the elaboration of resolution planning, under Articles 8 and 9 and all of the other related provisions shall apply from 1 January 2015. 4. By way of derogation from paragraph 2 of this Article, Articles 1 to 4, 6, 30, 42 to 48, 49, Article 50(1)(a), (b) and (g) to (p), Article 50(3), Article 51, Article 52(1) and (4), Article 53(1) and (2), Articles 56 to 59, 61 to 66, 80 to 84, 87 to 95 and 97 and 98 shall apply from 19 August 2014. 5. By way of derogation from paragraph 2 of this Article, Article 69(5), Article 70(6) and (7) and Article 71(3), which empower the Council to adopt implementing acts and the Commission to adopt delegated acts, shall apply from 1 November 2014. 6. From 1 January 2015, the Board shall submit a monthly report approved in its plenary session to the European Parliament, to the Council and to the Commission on whether the conditions for the transfer of contributions to the Fund have been met. From 1 December 2015, where those reports show that the conditions for the transfer of contributions to the Fund have not been met, the application of the provisions referred to in paragraph 2 shall be postponed by one month each time. The Board shall submit a further report each time at the end of that month.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal T he proposed amendments to Regulation (EU) 806/2014 (the Single Resolution Mechanism Regulation or SRMR) are part of a legislative package that includes also amendments to Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR), to Directive 2013/36/EU (the Capital Requirements Directive or CRD) and to Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD). Over the past years the EU implemented a substantial reform of the financial services regulatory framework to enhance the resilience of financial institutions in the EU, largely based on global standards agreed with the EU’s international partners. In particular, the reform package included Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, Directive 2014/59/EU (the Bank Recovery and Resolution Directive or BRRD), on recovery and resolution of institutions and Regulation (EU) No 806/2014 on the Single Resolution Mechanism (SRM). These measures were taken in response to the financial crisis that unfolded in 2007-2008.The absence of adequate crisis management and resolution frameworks forced governments around the world to rescue banks following the financial crisis. The subsequent impact on public finances as well as the undesirable incentive of socialising the costs of bank failure have underscored that a different approach is needed to manage bank crises and protect financial stability. Within the Union and in line with the significant steps that have been agreed and taken at international level, Directive 2014/59/EU (Bank Recovery and Resolution Directive (BRRD) 1 and Regulation (EU) No 806/2014 (Single Resolution Mechanism Regulation (SRMR) 2 have established a robust bank resolution framework to effectively manage bank crises and reduce their negative impact on financial stability and public finances. A cornerstone of the new resolution framework is the “bail-in” which consists of writing down debt or converting debt claims or other liabilities into equity according to a pre-defined hierarchy. The tool can be used to absorb losses of and internally recapitalise an institution that is failing or likely to fail, so that its viability is restored. Therefore, shareholders and other creditors will have to bear the burden of an institution's failure instead of taxpayers. In contrast to other jurisdictions, the Union bank recovery and resolution framework has already mandated resolution authorities to set for each credit institution or investment firm ('institution') a minimum requirement for own funds and eligible liabilities (MREL), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The delegated legislation concerning the practical implementation of this requirement has been adopted recently by the Commission 3 . At the global level, the Financial Stability Board (FSB) has published on 9 November 2015 the Total Loss-absorbing Capacity (TLAC) Term Sheet ('the TLAC standard') that was adopted a week later at the G20 summit in Turkey 4 . The TLAC standard requires global systemically important banks (G-SIBs), referred to as global systemically important institutions (G-SIIs) in the Union legislation, to hold a sufficient amount of highly loss absorbing (bail-inable) liabilities to ensure smooth and fast absorption of losses and recapitalisation in resolution. In its Communication of 24 November 2015 5 , the Commission committed to bring forward a legislative proposal by the end of this year so that the TLAC standard can be implemented by the agreed deadline of 2019. In addition, the Commission committed to review the existing MREL rules with the view to provide full consistency with the internationally agreed TLAC standard by considering the findings of a report that the European Banking Authority (EBA) is required to provide to the Commission under Article 45(19) of the BRRD. An interim version of that report has already been published by the EBA on 19 July 2016 6 and the final report is expected to be submitted in the course of December 2016. While the general BRRD and SRMR frameworks remain valid and sound, the main objective of this proposal is to implement the TLAC standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. Differently from the TLAC standard, which contains a harmonised minimum level, the level of MREL is determined by resolution authorities on the basis of a case-by-case institution specific assessment. Finally, the minimum TLAC requirement should be met in principle with subordinated debt instruments, while for the purposes of MREL, subordination of debt instruments could be required by resolution authorities on a case-by-case basis to the extent it is needed to ensure that in a given case bailed in creditors are not treated worse than in a hypothetical insolvency scenario (which is a scenario that is counterfactual to resolution). In order to achieve a simple and transparent framework providing legal certainty and consistency, the Commission is proposing to integrate the TLAC standard into the existing MREL rules and ensure that both requirements are met with largely similar instruments. This approach requires introducing limited adjustments to the existing MREL rules ensuring technical consistency with the structure of any future requirements for G-SIIs. In particular, further appropriate technical amendments to the existing rules on MREL are needed to align them with the TLAC standard as regards inter alia the denominators used for measuring loss-absorbing capacity, the interaction with capital buffer requirements, disclosure of risks to investors and their application in relation to different resolution strategies. While implementing the TLAC standard for G-SIIs, the Commission's approach will not materially affect the burden of institutions which are not G-SIIs to comply with the provisions on MREL. Operationally, the harmonised minimum level of the TLAC standard will be introduced in the Union through amendments to the Capital Requirements Regulation and Directive (CRR and CRD) 7 while the institution-specific add-on for G-SIIs and the institution specific MREL for non-G-SIIs will be dealt with through targeted amendments to the BRRD and SRMR. As such, this proposal is part of a wider review package of the Union financial legislation aiming at reducing risks in the financial sector (CRR/CRD review) and making it more resilient. This proposal covers specifically the targeted amendments to the SRMR related to the implementation of the TLAC standard in the Union. This proposal will apply to the Single Resolution Board (SRB) and national authorities of the Member States participating in the Single Resolution Mechanism (SRM) when they set and implement the requirements on loss absorbing and recapitalisation capacity of financial firms established in the Banking Union.
Revised version (Article 99 Entry into force):
1. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union . 2. With the exceptions set out in paragraphs 3 to 5, this Regulation shall be applicable from 1 January 2016. 3. By way of derogation from paragraph 2 of this Article, the provisions relating to the powers of the Board to collect information and cooperate with the national resolution authorities for the elaboration of resolution planning, under Articles 8 and 9 and all of the other related provisions shall apply from 1 January 2015. 4. By way of derogation from paragraph 2 of this Article, Articles 1 to 4, 6, 30, 42 to 48, 49, Article 50(1)(a), (b) and (g) to (p), Article 50(3), Article 51, Article 52(1) and (4), Article 53(1) and (2), Articles 56 to 59, 61 to 66, 80 to 84, 87 to 95 and 97 and 98 shall apply from 19 August 2014. 5. By way of derogation from paragraph 2 of this Article, Article 69(5), Article 70(6) and (7) and Article 71(3), which empower the Council to adopt implementing acts and the Commission to adopt delegated acts, shall apply from 1 November 2014. 6. From 1 January 2015, the Board shall submit a monthly report approved in its plenary session to the European Parliament, to the Council and to the Commission on whether the conditions for the transfer of contributions to the Fund have been met. From 1 December 2015, where those reports show that the conditions for the transfer of contributions to the Fund have not been met, the application of the provisions referred to in paragraph 2 shall be postponed by one month each time. The Board shall submit a further report each time at the end of that month. This Regulation shall be binding in its entirety and directly applicable in all Member States.