The European Union

Abstract

Chapter 3 introduces the EU regime. The EU adopted the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) and created special regimes for cross-border bank resolution. For Banking Union Member States, the Single Resolution Board (SRB) is the resolution authority for cross-border banks. The BRRD transposes the previous Directive on Reorganisation and Winding-up of Credit Institutions (CIWUD), and thus resolution actions imposed on an EU bank with one or more branches in other Member States are automatically recognised in those other Member States. In addition, the BRRD requires that resolution colleges must be established to resolve banking groups consisting of entities in different Member States. These are special intra-EU arrangements. On the other hand, for resolution actions taken by third-country authorities with regard to third-country banks with entities in the EU, Articles 94-96 BRRD list the conditions for recognition and grounds for refusal of recognition. These provisions make it explicit that EU resolution authorities are empowered to recognise and enforce third-country resolution actions. Article 94 BRRD specifies that, after recognition, EU resolution authorities have the power to enforce third-country resolution actions with regard to subsidiaries (equity or other ownership instruments), branches, and assets of third-country banks located in the EU, and rights and liabilities governed by the law of one of the EU Member States. In particular, Article 96 accepts the jurisdiction of third-country resolution authorities, and EU branches of third-country institutions are generally subject to third-country resolution authorities, unless an EU branch is not subject to third-country resolution actions or recognition of third-country resolution actions would violate EU public policies. Article 95 BRRD numerates five public policies, based on which EU authorities may refuse to recognise and enforce third-country resolution actions, namely, financial stability, resolution objectives, equal treatment of creditors, material fiscal policies, and national laws. Given the lack of cases, for the time being, it is difficult to predict how EU authorities would apply these exceptions. In general, these rules are overly simple, without a comprehensive list of conditions for recognition or distinguishing recognition of foreign resolution proceedings with ongoing effects and foreign resolution measures with immediate effects, let alone subsequent consequences after recognition.