A decision on whether an institution is failing or starting to fail is necessary to start a resolution process.
Resolution offers an alternative to normal insolvency proceedings, and can only happen when an institution is considered to be failing or likely to fail; when private sector solutions and supervisory actions are not able to prevent that failure within a reasonable timetable, and when normal insolvency proceedings would not be in the public interest, the EBA said in a statement.
Resolution is a final step, usually following earlier interventions.
The decision on triggers for resolution can be made by EBA supervisors, or by 'resolution authorities' appointed by EU countries. The new guidelines are designed to promote "convergence of EU supervisory and resolution practices in relation to how resolution should be triggered".
The guidelines cover the criteria that should be used by supervisors and resolution authorities to make decisions on these triggers, and lay out procedural rules for each authority, as well as the link between the supervisory review and evaluation process and the decision on failing or likelihood to fail.
Guidance is also included on consultation and the exchange of information between authorities in making decisions.
The guidelines will apply from 1 January 2016.