EBA · 2017_3113 Final Q&A

AST in combination with other resolution tools

Regulation
Directive 2014/59/EU (BRRD)
Article
42, para. 3
Topic
Resolution tools and powers
Submitted by
Competent authority
Submitted
2017-01-20
Answered
2022-01-21
Answer provided by
ESAs (EBA, ESMA, EIOPA)
More Q&As on this regulation →

Question

What is the rationale for using the Asset Separation Tool in combination with other resolution tools?

Background

The conditions for applying the tool Asset Separation Tool (AST) include the need to maximise the liquidation proceeds. As the objective of an AST according to Article 42(3) of Directive 2014/59/EU (BRRD) is to maximise the value of the assets transferred there seems to be an overlapping between the conditions for applying the tool and the objective of the tool. While the BRRD recognises the need to avoid a destruction of value - which is no longer a resolution objective but remains a constraint that the authority should consider when pursuing these objectives - we do not believe that the authorities are obliged to set up an AST to maximise the liquidation proceeds as the funding that an AST may require could be substantial. More importantly, we wonder how to distinguish between the AST and the continuation of the residual entity following a transfer of assets and liabilities to a third party or a bridge bank. According to Article 37(6) the liquidation of the residual entity should be done in a reasonable timeframe.

Answer

In accordance with Article 37(5) of Directive 2014/59/EU (BRRD), the asset separation tool can be used only together with another resolution tool. The rationale for using the asset separation tool only in combination with other resolution tools is to prevent an undue competitive advantage for the failing institution, as explained in Recital (66) BRRD. 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.

Original source: European Banking Authority, Q&A ID 2017_3113

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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