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EBA publishes final standards and guidelines on simplified obligations

The European Banking Authority (EBA) has published final guidelines and a final draft of its Implementing Technical Standards (ITS) for identifying whether failing institutions are eligible for 'simplified obligations'.09 Jul 2015

Simplified obligations mean that a bank or financial institution is subject to normal insolvency proceedings, rather than the more complex full obligations that have been designed to protect financial markets and other institutions.

Under the Bank Recovery and Resolution Directive (BRRD), a single rulebook for the resolution of failing banks and investment firms across the EU, resolution bodies can choose to apply simplified obligations to failing banks if they feel this is unlikely to have a significant negative effect on financial markets, on other institutions, on funding conditions, or on the wider economy.

The EBA guidelines aim to create a common framework across the EU for applying simplified obligations, based on proportionality, the EBA said.

Competent authorities and resolution authorities will have to notify the EBA on the way they assessed institutions against the criteria, and the nature of the simplified obligations applied.

The EBA also issued final ITS on the procedures, forms and templates to be used when giving information on resolution plans under the BRRD.

The draft ITS have been submitted to the European Commission for endorsement, following which they will be examined by the European Parliament and Council before being published in the official journal.

The guidelines will be translated into the official EU languages and published on the EBA website, and will apply two months and one day after publication.

The BRRD was adopted by the Commission in early 2014 to provide authorities with comprehensive and effective arrangements to deal with failing banks at national level, as well as cooperation arrangements to tackle cross-border banking failures.

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