Resolution planning

In order to ensure that institutions can be resolved in an orderly fashion, the Central Bank of Ireland is required as national resolution authority (NRA) to undertake resolution planning, as set out in the EU Bank Recovery and Resolution Directive (BRRD).

The resolution planning process consists of the development of a resolution plan for each institution and in-scope investment firm. This resolution plan should set out the resolution tools that would be applied to the institution in the event of failure, as well as the general process that would be followed by the relevant authorities, particularly in a cross-border context.

For institutions which are under the remit of the Single Resolution Board (SRB) resolution plans are prepared jointly by the SRB and NRAs. This is done within the forum of Internal Resolution Teams (IRTs). IRTs are the main mechanism through which the SRB and NRAs cooperate in performing resolution activities (resolution planning and preparation of resolution schemes) at expert level. IRTs are composed of staff of the SRB and of the relevant NRAs, and are headed by coordinators appointed from the SRB’s senior staff. The SRB have published an introduction to resolution planning for transparency.

The purpose of a resolution plan is to determine an institution’s critical functions, to identify and address any impediments to its resolvability and to prepare for its possible resolution. A resolution plan is a comprehensive document, which details the characteristics of a bank and describes the preferred resolution strategy for that bank, including which resolution tools to apply. It concludes with a resolvability assessment of the bank. The purpose of this assessment is to identify and to address any impediments to the resolution of the bank and to set its minimum requirement for own funds and eligible liabilities (MREL) to ensure that they have a sufficient level of loss absorbing capacity in place. The loss-absorbing capacity of the bank is the current amount and composition of its own funds and liabilities that can absorb losses or that can be used to recapitalise the bank.

The purpose of MREL is to ensure that a bank has sufficient loss absorbing and recapitalisation capacity at all times, i.e. a minimum amount of own funds and eligible liabilities, that can credibly and feasibly be written down or converted into equity. The liabilities eligible for MREL represent only a subset of the liabilities that may be bailed in.

MREL will be set on a case by case basis, and will depend on a number of relevant factors such as size, systemic risk and the identified resolution strategy for that institution.

Involvement of institution in resolution planning

Recovery plans are drafted by credit institutions and in-scope investment firms, while resolution plans are documented by resolution authorities with the involvement of credit institutions and in-scope investment firms. In particular, institutions will be required to address or remove any impediments to resolvability which are identified by the resolution authority as part of the annual resolvability assessment process. An institution may be required to make changes to its operating structure or its balance sheet in order to address these impediments. For example, in order to ensure that losses can be imposed on creditors in the event of failure, institutions may need to issue additional capital or eligible (i.e. bail-inable) liabilities.

Reporting

Institutions under SRB remit

Pursuant to Article 11 (1) BRRD and Section B of BRRD Annex, as well as Article 8 (4) SRMR, the SRB collects information for drawing up and implementing resolution plans for banks under its remit.
Therefore, institutions under SRB remit are required to submit to the Central Bank the following information:

  • Liability Data Report (LDR) (T templates) only in XBRL format uploading it to the Central Bank’s  online reporting system (ONR) by 31 March 2019 (Resolution Planning XBRL Returns, SRB returns)
  • FMI Report in excel format submitted directly to the Resolution Division of the Central Bank by 12 April 2019
  • Critical Functions Report in excel format submitted directly to the Resolution Division of the Central Bank by 12 April 2019
  • Selected EBA Templates (Z templates) only in XBRL format uploading it to the Central Bank’s ONR by 30 April 2019 (Resolution Planning XBRL Returns, EBA returns)

The Central Bank will submit the returns to the SRB as required.

Institutions under the Central Bank remit

Institutions which are not under the SRB remit are required to submit to the Central Bank all Z templates (as per the EBA ITS on resolution planning, according to the relevant EBA Annex I Templates and the EBA Annex II Instructions) in XBRL format uploading it to the Central Bank’s ONR by 31 March 2019 (Resolution Planning XBRL Returns, EBA returns).

Contact

Any questions or requests for additional information can be addressed to the Central Bank and submitted by email to ResolutionReporting@centralbank.ie.

All technical queries in respect to the ONR functionality, should be directed to onlinereturns@centralbank.ie.