Crisis management
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.
The role of the ECB
Effective and timely corrective measures
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.
Resolution planning and procedures
The interaction between the Single Supervisory Mechanism, the Single Resolution Board and national resolution authorities is structured around three main pillars:
- complementarity of institutional roles
- mutual cooperation
- strong coordination
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.
Crisis Management Groups and Cross-Border Stability Groups
A number of groups have been set up and agreements concluded to increase cooperation and coordination among different parties. These include:
- Crisis Management Groups (CMGs)
- Cross-Border Stability Groups (CBSGs)
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.
Crisis Management Groups
Who participates in CMGs?
CMGs bring together home and key host authorities of all Global Systemically Important Financial Institutions (G-SIFIs). These include:
- supervisory authorities
- central banks
- resolution authorities
- finance ministries
- public authorities responsible for guarantee schemes
CMG members cooperate closely with authorities of other countries in which firms have a systemic presence.
Key Attributes of Effective Resolution for Financial Institutions
Key tasks
CMGs enhance coordination and cooperation between home and host authorities of G-SIFIs. They:
- prepare for the effective management and/or resolution of an institution
- carry out recovery and resolution tasks, e.g. manage recovery and resolution plans
Cross-Border Stability Groups
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.