Resolution Authority Research Articles

The Triumph of Soft Law in the Financial Sector: Can Non-binding Law Have Binding Domestic Legal Effects?

Examining the seemingly simple question of whether guidelines in the financial sector are mandatory reveals a highly complex landscape for supervision of the financial sector across the European Union, where international and national financial law enter collision and the participants come to the table with differing mandates/expectations. The article addresses the results, with focus on banking regulation, wherein the European Banking Authority and, in Estonia, the Financial Supervision and Resolution Authority are among the main guideline-issuers. The balance achieved is critical because the fines that the supervisory and resolution authorities can impose on banks for non-compliance with mandatory rules can reach 10% of these entities’ total annual net turnover from the preceding business year. An effort to consider all of the relevant factors for understanding which side of the mandatory/advisory line the guidelines stand on, the article constitutes an attempt to initiate vital discussion of the environment created in the financial sector for soft law (i.e., guidelines), which may under certain circumstances take on a larger role than that soft law’s legal nature allows.

Ethical Benefits and Challenges in Insurance: Framework of Introducing Pillar IV Regulation to Solvency II

The paper delves into the concept of Pillar IV, which addresses the recovery, resolution, and orderly exit from the insurance market within the framework of Solvency II - an essential tool for insurers' supervision. While Solvency II has undoubtedly reduced the risk of insolvency for insurers, it hasn't eliminated it. Therefore, this research aims to conduct a comparative analysis of various market models and proposals from authorities to come up with the best possible solutions for recovery stages, mechanisms to be implemented in the case of economic non-viability of the insurer, and resolution mechanisms to ensure a seamless exit from insolvency. The article evaluates different resolution methods, weighing their benefits and challenges, considering the interests of consumers, and the roles of regulatory and resolution authorities. The authors suggest a set of best practices, solutions, and guidelines to implement a resolution through regulations, which can be used to establish Pillar IV and enhance the level of preparedness of insurers. The goal is to avoid the adverse systemic effects of a traditional bankruptcy, which could significantly impact consumers, the economy, and public funds. Keywords: Solvency II; Resolution; Insurance; Recovery; Bail-in

Obligation to State Reasons: Clear Principle with (Still) Unclear Scope? In Search of an Adequate Standard of Reasoning for a Decision Based on Confidential Data (Joined Cases C???584/20 P and C???621/20 P Commission and SRB v Landesbank Baden-Württemberg)

This article provides an analysis of the judgment of the Grand Chamber of the Court of Justice (the Court) of 15 July 2021 delivered in Joined Cases C-584/20 P and C-621/20 P (Commission and SRB v Landesbank Baden-W??rttemberg), which offers valuable insights into the question of the scope of the obligation to state reasons. In particular, the judgment clarifies how that obligation should be weighed, if necessary, with the obligation to protect the confidential data within the EU decision-making process. While the judgment specifically pertains to a decision of the Single Resolution Board regarding the calculation of ex-ante contributions to the Single Resolution Fund, its implications extend to all areas of EU law where the EU administration relies on confidential information in order to adopt a decision. Additionally, the judgment holds particular significance for the National Resolution Authorities of the Member States non-participating in the Banking Union, since they are required to calculate ex‐ante contributions to their national resolution financing arrangement and must, for this purpose, rely on the methodology provided by the EU legislator, as interpreted by the Court. Finally, the authors argue that regardless of its significance, the judgment leaves several questions unanswered regarding the adequacy of the reasoning of an administrative decision based on confidential data.

Could it Happen in the EU? An Analysis of Loss Distribution between Shareholders and AT1 Bondholders under EU Law

Abstract In March 2023, the Swiss bank Credit Suisse’s so-called Additional Tier 1 (AT1) bonds were written down to facilitate the bank being taken over by UBS, its national rival. Ensuing discussion and market reactions went well beyond Swiss borders, as the write-down was completed without Credit Suisse’s shareholders first being wiped out, thereby deviating from the principle that shareholders bear losses ahead of all other investors. This article asks whether such an outcome is possible under EU law. A comprehensive analysis demonstrates how this question is governed by the combined operation of contractual clauses and the resolution authority’s statutory powers. Combining applicable EU law with empirical analysis of contractual terms employed by EU banks issuing AT1 bonds and their capital requirements, the article argues that an outcome akin to that of the Credit Suisse write-down is unlikely for EU banks. Building on this analysis, it is shown what reform is needed if EU policymakers consider it desirable to have AT1 bonds absorb losses outside of cases requiring intervention by the resolution authority.

The prevalent perplexities and countermeasures of the survey and settlement operation of Bangladesh

Identification of land through an effective land survey ensures a secure land tenure system as well as conveys a smooth settlement of land disputes. At this backdrop, the study is framed with the objective of assessing the efficacy of Zonal Settlement System (ZSS) in Bangladesh. Using non-doctrinal data collection techniques, the study found that the prevailing settlement operation conducted under ZSS in Bangladesh is surrounded by a traditional, complex, and lengthy survey method. The study also revealed that insufficient manpower, inadequacy of technical support, administrative misfeasance, and ineffective dispute resolution arrangements worsen the situation. However, the study discovered that initiation of digital land survey and inauguration of an extensive capacitybuilding program will be instrumental in overcoming the crisis. Based on the deliberate discussion, the study also recommends for establishing a time-saving and fruitful land surveying approach, along with effective and robust supervisory administration and dispute resolution authority.

Automating Grievance Portal by Automating Central Grievance Redressal System using Artificial Intelligence

This research paper is introduces as a centralized grievance portal based on Artificial Intelligence (AI) for streamlined and effective complaint resolution. The proposed system manipulates advanced AI techniques to enhance the complaint handling process, providing a user-friendly interface for complainants & optimizing resource utilization for resolution authorities. The integration of machine learning algorithms ensures intelligent analysis of complaints, prioritization, and swift solution, ultimately contributing to an efficient and transparent grievance redressal mechanism

How to make a SPE resolution strategy work in the EU

Abstract When dealing with the resolution of a banking group under EU regulation there are two different approaches: Single point of entry (SPE) versus Multiple Point of Entry (MPE). In a MPE strategy, the resolution authority is taking separate resolution actions at the level of individual legal entities of the group. In a SPE strategy, the resolution authority is taking a resolution action at the level of a single entity, usually the parent undertaking, which, consequently, becomes the so called “resolution entity” building together with its subsidiaries the “resolution group”. The general idea in a SPE strategy is, that losses at subsidiary level are first streamed up to the parent undertaking (resolution entity), i. e. capital is streamed down from the parent undertaking to the subsidiary to cover its losses and ensure its recapitalisation. This leads to losses at the resolution entity level, which, if the resolution entity meets the conditions for resolution, are taken care of by applying resolution tools to the resolution entity. This procedure is not necessarily a two-step approach but could also be completed in one go. In the following, we focus on different ways to upstream losses from the subsidiary to the parent undertaking and to recapitalise the subsidiary.

Bank resolution in South Africa: Recent developments

AbstractIn this contribution, the authors explore recent developments in South Africa's approach to bank resolution, assessing compliance of its new regime with the Financial Stability Board's Key Attributes of Effective Resolution Regimes for Financial Institutions (KAs). Emphasizing the imperative for orderly resolutions to avert financial crises, the authors scrutinize the post‐2008 Global Financial Crisis regulatory landscape. Until June 2023, South Africa's approach to bank failure was limited to curatorship and liquidation under the Banks Act 94 of 1990. Addressing gaps identified by international bodies such as the Financial Stability Board, International Monetary Fund, and the World Bank, and taking lessons from the failure of African Bank in 2014, South Africa has transitioned to a Twin Peaks regulatory model and also introduced a comprehensive resolution framework effective June 1, 2023, captured in the Financial Sector Regulation Act 9 of 2017. This framework currently applies to banks only. The South African Reserve Bank now holds an explicit financial stability mandate and is designated as the resolution authority. The article discusses the design features for an effective resolution regime as recommended in the KAs to benchmark the new South African resolution regime, noting overall compliance. However, it acknowledges the need for further development in certain respects to enhance alignment.

Asset Separation as a Bank Failure Management Tool

The article is devoted to the legal aspects of an asset separation tool as a bank failure management tool. Asset separation tool is provided by FSB Key Attributes of Effective Resolution Regimes for Financial Institutions and Directive 2014/59/EU (Bank Recovery and Resolution Directive, or BRRD). However, it has not been implemented in Ukrainian legislation to date. The article defines key elements required for effective transposition of the asset separation tool. It is fundamentally important to ensure clarity in the authority’s powers to conduct non-performing assets transfer to an asset management company and powers to transfer them back in cases provided in the law, as the framework should be predictable for all stakeholders. General rules for obtaining the consent of owners of the failed banks or any other parties should not be applicable. The assets should be transferred to the asset management company with the view to value maximization or orderly liquidation. An asset separation tool is not a standalone tool and shall be applied along with other tools to deal with bank failures. The article also defines key safeguards and requirements for an asset management company to operate efficiently and mitigate risks of political interference. Most asset management companies designed for bank failure management are owned by the state, and in line with this the BRRD envisages that an asset management shall wholly or partially belong to the state or a resolution authority. The BRRD provides that the resolution authority shall approve a statutory document of the asset management company, management and their remuneration, as well as the strategy and risk profile of the company. At the same time, there should be safeguards to ensure that the asset management company should be commercially oriented and operationally independent. The most efficient asset management companies have a narrow mandate. Special powers may be introduced for an asset management company when the general framework has impediments to the efficient operation of an asset management company. It should be noted that the asset management company has a temporary nature and should be wound up once its goal is reached. Necessary incentives should be introduced in this regard. This could be a sunset clause, defined interim key performance indicators, which should be flexible and regularly reviewed, and financial incentives for staff of the asset management company. It is suggested to introduce amendments to the Law of Ukraine ‘On household deposit guarantee system’ to implement the particularities described in the article.

The National Bank of Belgium as a Resolution Authority

The National Bank of Belgium as a Resolution Authority

Senior Non-preferred Bonds as an Instrument to Meet the MREL Requirement

The purpose of the article is to present the results of the first assessment of the senior non-preferred (SNP) bond market’s development in Poland. SNP bonds were introduced to facilitate meeting the banks’ MREL, which aims to build banks’ loss absorption and recapitalization capacity. At the same time, they are the next source of bank funding. The development of the SNP bond market has been initiated relatively recently with the full establishment of resolution systems and the introduction of the MREL requirement for banks. Although the first non-binding decisions to impose the MREL requirement were issued in 2016, the concept of SNP was formally introduced in 2017. In 2019, an amendment to the rules for determining the MREL requirement was adopted, which was implemented into the Polish legal framework in 2021, and in 2022, an amendment to the regulations on bonds was introduced, enabling the issuance of SNP bonds counted to MREL. Since then (2022), there has been a full legal framework for setting and maintaining the MREL requirement, and therefore full conditions for the development of this market in Poland. Therefore, it is justified to say that this market is relatively young. Moreover, it is under-investigated by scientists. This justifies the assessment of the potential scale of this market, its ability to achieve the goal for which it was created, as well as the premises and barriers to its development.
 Methodology. The research methods were quantitative analysis (calculation of the potential shortage of the MREL requirement and needs in the field of securities issuance based on reporting data) and qualitative analysis (in terms of assessing the challenges).
 Results of the research. The main determinant of its potential is the amount of MREL shortfall, which depends on the financial situation of banks and partly on the strategy of resolution authorities (responsible for setting the level of this requirement). The main challenges for the Polish SNP bond market are related to the prospects for further development of the banking sector and its environment (business and strategic). Nevertheless, it seems that the potential of the SNP bond market in Poland is underrated. The article contributes to general knowledge about bank funding sources.

From Communal to Individual: Shifting Authorities of Family Dispute Resolution in Minangkabau Society

This study aims to explain the shift of authority in resolving family disputes in Minangkabau society. At least three authorities are involved in resolving family issues in Minangkabau: religious authority, represented by leaders with religious knowledge; customary authority, held by leaders with their own laws; and state authority, enforced by judges in court based on laws and regulations. This research is a field study with a socio-legal approach. The study examined Minangkabau households in both rural and urban areas, utilizing questionnaires and in-depth interviews to collect data from individuals involved in household disputes. The data were then reduced, presented and verified. This study found that in addition to using the three long-standing authorities in Minangkabau society, disputants are more likely to use individual authority in resolving their family disputes. The disputants are more likely to resolve their family problems independently without involving religious leaders, customary leaders, or religious court judges. The tendency towards individual authority is more prevalent in urban communities. The strengthening of individual authority coincides with the weakening of the formal institutions of the three authorities in Minangkabau society. The factors contributing to the diminishment of these authorities include modernisation, technological advancements, and digitalisation which incentivises the involved parties to logically settle their disputes for their individual gains and aspirations. Based on the research findings, the current study confirms that the shift in family dispute resolution authority indicates that there has been a shift from extended to core family patterns in Minangkabau society

Building trust to prevent banking crises

Banking crises are a feature of the modern financial system. However, their impact and probability can be mitigated by building trust in the banking sector. This is primarily achieved by banks themselves. However, with vigilant ex-ante monitoring and swift and decisive action when a banking crisis emerges, regulators can shore up trust in the banking sector. The Single Resolution Board, as the banking union’s central resolution authority, is a key element of the post-global financial crisis regulatory framework and has been promoting trust in the banking sector by making banks more resolvable.

The liability of national central banks acting as resolution authorities, financial independence, and the prohibition of monetary financing: Banka Slovenije

The liability of national central banks acting as resolution authorities, financial independence, and the prohibition of monetary financing:<i> Banka Slovenije</i>

Türk-İslam Tarihinde Ombudsman Benzeri Kurumlar: Literatür Taraması

Ombudsman emerged in the 18th century in Sweden, which can be considered primarily an Anglo-Saxon geography in the world history. After this, especially II. It has been implemented in different states on all continents of the world since World War II. From this perspective ombudsman is a complaint resolution authority that is implemented in almost all countries in our contemporary world. As a matter of fact, ombudsman is a legal authority that accepts complaints from the public regarding public administration problems in a state. Therefore, it is an important mechanism of justice and human rights in contemporary societies. It is also decisive in improving the quality of democracy. As a matter of fact, such institutions were intensively active in the former Turkish-Islamic states, the Ottoman Empire and the Republic of Turkey. These mechanisms have become the basic institutions of seeking rights and making complaints, working almost like ombudsman. These institutions also maintained their characteristics as basic state organs that assist the government. As division of labor and specialization has increased in today's states, institutions that strive for rights have also turned to their own fields.The aim of this study is to reveal ombudsman-like structures in the mentioned period and relate them to ombudsman. The method of the study is literature review based on qualitative analysis. Keywords: Old Turkish Islamic States, Ottoman Empire, Turkey, Ombudsman, Seeking Rights, Literature Review JEL Codes: H83, D73

СПОСОБИ ВРЕГУЛЮВАННЯ НЕПЛАТОСПРОМОЖНОСТІ БАНКІВ В УКРАЇНІ

It should be noted that the problems of liquidation and resolution of banking institutions and the regulatory framework for this process remain poorly researched. The domestic practice of resolving bank is not perfect and should be harmonized with the European practice. The purpose of the research is to systematize the main ways of resolving domestic banks. The author distinguishes the components of the resolution mechanism, the form and nature of which depend on the adopted rules of regulation in a particular country. The article analyzes the resolution instruments for domestic banks. The author focuses on their main points and features. It is noted that the method of liquidation with payouts is not related to the resolution, but it is the liquidation of a banking institution with all its consequences. It is emphasized that the resolution should be based on the principle of least cost for the DGF, which is the main state resolution authority. It is recognized that the resolution of banking institutions includes the sale of business or shares in the resolution regime, the establishment of a bridge bank, purchase and assumption, and liabilities conversion. The latter instrument can be implemented with financial support from the Deposit Guarantee Fund in the form of compensation for the assumed liabilities or in the form of a loan. The author emphasizes the differences between the methods of establishing a bridge bank and the transfering assets and liabilities. The possibility of establishing a bridge bank for a period of more than one year is noted. The use of the bridge bank resolution instrument (bridge bank) helps to preserve the banking business. Proposals for improving the resolution instruments in Ukraine have been formulated.

Liability of Financial Supervisors and Resolution Authorities: Perspectives from Comparative and European Union Law

Liability of Financial Supervisors and Resolution Authorities: Perspectives from Comparative and European Union Law

Panel I of the SRB Legal Conference – Legal and Operational Challenges That Arise in Respect of the Cooperation Between Banking Supervision and Resolution Authorities in the EU and in Respect of Their Cooperation with Third-Country Authorities

Panel I of the SRB Legal Conference – Legal and Operational Challenges That Arise in Respect of the Cooperation Between Banking Supervision and Resolution Authorities in the EU and in Respect of Their Cooperation with Third-Country Authorities

The Legal and Practical Challenges Which Arise in Recognition of Third-Country Resolution Action: A Case Study in Cooperation Between Banking Supervision and Resolution Authorities

The Legal and Practical Challenges Which Arise in Recognition of Third-Country Resolution Action: A Case Study in Cooperation Between Banking Supervision and Resolution Authorities

Inter-agency Cooperation Within the SRM: Legal and Operational Challenges for the Cooperation Between Banking Supervision and Resolution Authorities in the EU and With Third-country Authorities

Abstract 900 In bank resolution, swift and effective cooperation of different actors is of essence, particularly in cross-border cases. While the same can be said about cross-border insolvency management generally, the European framework for the recovery and resolution of failing banks and, in particular, the centralisation of resolution powers within the Single Resolution Mechanism stand out as particularly complex – and, at the same time, remains to some extent untested to the present date. Against this backdrop, the present article explores the statutory framework for cooperation between the Single Resolution Board, the European Central Bank in its capacity as supervisory authority within the Single Supervisory Mechanism, National Resolution Authorities and Third Country authorities. It concludes that, while the legal and institutional arrangements governing inter-agency cooperation are generally sound, operationalisation in actual cases might still be exposed to unexpected disruptions, especially in cases where political interests are at stake.