Determination the failure of an institution

The general rule under Article 32(1) BRRD is that the determination that an entity is failing or likely to fail (FOLF) is to be done by the competent authority, after consulting the resolution authority. However, in order to address the potential problem of supervisory forbearance, Member States are given discretion to provide in their national law that the resolution authority can also make this determination, after consulting the competent authority, when the applicable national law entrusts to the resolution authority the necessary tools for making such determination, such as access to the necessary information. Any differences in the assessment of FOLF can be expected to be discussed as part of the consultation process that is provided by Article 32 BRRD, under both paragraphs 1(a) and 2. In case the competent authority determines an institution as FOLF, and the valuation subsequently carried out according to Article 36 BRRD suggests that the FOLF determination may be incorrect, the resolution authority can be expected to communicate such conclusion to the competent authority as part of the consultation process, but it cannot legally reverse the determination. It would be for the competent authority to withdraw or amend its previous position, if it deems so appropriate. However, the resolution authority can always abstain from resolution action, if it considers that the remaining conditions for resolution under Article 32(1) BRRD are not met. Disclaimer: The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.