If a bank experiences financial difficulties, it is crucial that supervisors intervene early and coordinate their responses effectively. This helps to preserve financial stability and minimise reliance on public funds.
As a banking supervisor, the ECB is able to react quickly when a bank does not meet, or is likely to breach, the requirements of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive IV (CRD IV).
It is important that a supervisor intervenes as early as possible so as to keep the bank viable, where feasible, and to preserve financial stability.
The ECB ensures that banks establish reliable recovery plans and reviews these plans on a regular basis. It also carries out further analysis, which allows for benchmarking, quality control and consistency checks.
The interaction between the Single Supervisory Mechanism, the Single Resolution Board and national resolution authorities is structured around three main pillars:
The ECB has a consultative role in resolution assessment and planning under the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR).
Resolution authorities will be responsible for deciding on the appropriate resolution action. The ECB will cooperate closely with the respective resolution authorities and notify them about the failure, or likely failure, of a bank.
A number of groups have been set up and agreements concluded to increase cooperation and coordination among different parties. These include:
The main aims of these groups are to enhance preparedness in normal times and to increase the ability to act quickly and efficiently in a crisis situation.
CMGs bring together home and key host authorities of all Global Systemically Important Financial Institutions (G-SIFIs). These include:
CMG members cooperate closely with authorities of other countries in which firms have a systemic presence.
CMGs enhance coordination and cooperation between home and host authorities of G-SIFIs. They:
CBSGs foster cooperation among parties with common financial stability concerns related to financial cross-border groups. They enhance their readiness to react to a crisis and facilitate the management and/or resolution of an institution in the case of a cross-border financial crisis.