European Union: Bank Recovery And Resolution Directive – FAQs

Last Updated: 26 August 2015
Article by Robert Cain
Most Read Contributor in Ireland, October 2018

The Bank Recovery and Resolution Directive (Directive 2014/59/EU) (BRRD) was introduced in light of concerns that insufficient tools and resources existed at EU-level to deal effectively with failing banks and investment firms, albeit many Member States, including Ireland, did have domestic resolution regimes in place. Given that the failure of a cross-border institution could severely affect the stability of the European financial markets, the BRRD was developed as a framework for resolving banks and large investment firms operating at both a national and cross-border level in the EU.

The BRRD has now been implemented into Irish law, and will supersede existing domestic resolution legislation where applicable.

This Briefing summarises the key aspects of the BRRD.


The BRRD was due to be transposed by each Member State by 31 December 2014. It was transposed into Irish law by SI 289/2015 on 9 July 2015 (the Irish Regulations).

Not all Member States have yet transposed the BRRD, and in May 2015 the European Commission requested 11 Member States (not including Ireland, which had already demonstrated progress towards transposition by issuing a Consultation Paper in December 2014) transpose the BRRD or risk referral to the European Court of Justice.


The BRRD applies to:

  • banks;
  • investment firms subject to the initial capital requirement in CRD IV; and
  • certain other financial institutions and financial holding companies.



  • provides a framework for resolving failing banks and large investment firms;
  • aims to reduce the use of taxpayer funds to rescue failing institutions, and eliminate (insofar as possible) the need for government-led bail-outs;
  • enables authorities to intervene early to prevent the failure of an institution;
  • enables authorities to take swift resolution action where a failure cannot be avoided; and
  • facilitates cooperation between competent authorities across the EU.



The Central Bank of Ireland (CBI) was designated as the competent authority in Ireland under the Irish Regulations, save as regards the specific tasks conferred on the European Central Bank (ECB) as part of the Single Supervisory Mechanism, in which case the ECB will function as competent authority.


The Irish Regulations appoint the CBI as the resolution authority in Ireland for BRRD purposes. The Irish Regulations also require that the CBI publish internal rules (including rules on professional secrecy) on information exchanges between it as resolution authority and its other functional areas. These internal rules were published by the CBI on 17 August 2015 and are available here. The Irish Regulations also require structural separation and separate reporting lines for those CBI staff involved in the BRRD resolution authority function.



  • Individual recovery plans

    Each institution to which the BRRD applies must, where it is not part of a group that is subject to consolidated supervision under CRD IV, prepare a recovery plan setting out the measures that it would take if its financial position deteriorated significantly. That recovery plan must be updated each year, after any material structural change and on request from the relevant competent authority.

    Such recovery plans must contemplate a range of stress-scenarios, and set out conditions and procedures to ensure that recovery options can be implemented quickly. Potential early intervention measures must also be included, together with options for recovery actions.

    Recovery plans are subject to assessment by the competent authority, which can require revisions to the plan if deficiencies are identified. It is also open to the competent authority to direct an institution to take steps to reduce its risk profile, review its strategy and structure, change its governance structure, change its funding strategy and facilitate its timely recapitalisation.

  • Group recovery plans

    Where a group is subject to consolidated supervision, the parent must submit a group recovery plan to the competent authority (and this can be circulated to other relevant competent authorities in other Member States). Group recovery plans must set out measures designed to stabilise the group, address or remove causes of the group's financial deterioration and restore the group's financial position. The group recovery plan must also, where applicable, include arrangements for the provision of intra-group financial support.

    Group recovery plans are subject to assessment by the competent authority, and by other relevant competent authorities in other Member States (where, for example, the group has a significant branch).


The CBI, as resolution authority in Ireland, must prepare a resolution plan for each institution, following consultation with the competent authority and with the resolution authorities in other Member States in which the institution (or members of its group) has significant branches.

Each resolution plan will set out the actions that the CBI plans to take in the event that the institution in question meets the conditions for resolution (see below for details of these conditions).

Resolution plans must be updated by the CBI at least annually, and should contemplate scenarios where the institution fails due to a period of general financial instability, and also where the institution fails for institution-specific reasons. Resolution plans must (among other matters) also demonstrate how the institution's critical functions could be separated to ensure continuity on any failure of the institution, list any perceived impediments to the institution's resolvability, set out a process for determining how core functions could be transferred to a third party, set out how resolution options could be financed, analyse the resolution plan's impact on employees, and set the level of minimum requirement for own funds and eligible liabilities if the bail-in tool is used (further detail on the bail-in tool is set out later in this Briefing).


In conjunction with the development of resolution plans, the CBI must also assess whether an institution is resolvable (following consultation with other relevant resolution authorities and with the competent authority for the relevant institution). That assessment must be made having regard to, at a minimum, the matters set out in Part 3 of the Schedule to the Irish Regulations. If the CBI's assessment is that an institution is not resolvable, it must notify the European Banking Authority (EBA).



Early intervention measures are steps that the competent authority may take if an institution has breached, or is likely to breach, certain prudential requirements. Possible breaches could include a reduction in own funds, deteriorating liquidity, increased leverage, increased non-performing loans or an increased concentration of exposures. Early intervention measures may include:

  • implementation of one or more measures from the institution's recovery plan;
  • directing the institution or its management body to develop an action programme;
  • directing the institution to convene a shareholders' meeting (the competent authority can directly convene the meeting if the institution fails to do so);
  • directing the institution or its management body to draw up a plan for renegotiating/restructuring its debt;
  • directing the institution to change its business strategy, legal structure or operational structure.

Where the above (and similar) measures are not regarded by the competent authority as sufficient to remedy the financial deterioration of the institution, the BRRD contains detailed provisions enabling the competent authority to remove senior management and to appoint a temporary administrator (on foot of an ex parte Court application for a temporary administration order).


Where a group member meets the conditions for early intervention, the BRRD also permits group entities to provide intra-group financial support in the form of loans, guarantees, the provision of assets for use as collateral or a combination of the foregoing. The intention behind this is to facilitate the stabilisation of the group (without adversely affecting the liquidity or solvency of the group entity providing the support).



The following conditions must be met for resolution of an institution to be regarded as necessary:

  • the competent authority, having consulted with the CBI as resolution authority, must have determined that the institution is likely to fail. This may be because the institution has breached, or is expected to breach, its authorisation requirements on a scale likely to result in its authorisation being withdrawn, it is or is likely to become balance sheet insolvent, it is or is likely to become cash flow insolvent (a requirement for emergency liquidity assistance from the CBI should not, of itself, trigger this condition), or extraordinary public financial support is required;
  • there must be no reasonable prospect of an alternative private sector measure (i.e. a sale to, or merger with, a private sector purchaser) which could remedy the situation;
  • resolution must be necessary in the public interest (and it must be the case that a normal winding up could not ensure the continuity of important functions, the protection of public funds, depositors, client assets or client funds, or avoid a significant adverse effect on the financial system); and
  • the Minister for Finance must be informed.


If the CBI as resolution authority intends to use one of the resolution tools at its disposal, any measures that it takes must have regard to certain overriding principles as follows:

  • first losses are to be borne by shareholders, followed by creditors. Creditor losses are to be borne in line with the order of priority that would apply in a normal insolvency, and creditors of the same class are to be treated equitably (unless otherwise provided by the Irish Regulations). Creditors are not to incur losses greater than what they would have incurred in a normal insolvency;
  • the management body and senior management must be replaced unless retention of one or more of those persons is necessary to achieve resolution;
  • persons are to be made liable for any responsibility for the institution's failure; and
  • covered deposits must be protected.

Before the CBI takes action, it must arrange an independent valuation of the institution's asset and liabilities. A provisional valuation is allowed in urgent cases where there may not be time to arrange a full independent valuation.


Four resolution tools are available (the sale of business tool, the bridge institution tool, the asset separation tool, and the bail-in tool), and they can be exercised individually or on a combined basis.


  • "Capital instruments order"

    The CBI can apply to Court for a "capital instruments order" to write-down or convert relevant capital instruments into shares or other instruments of ownership in respect of an institution that requires resolution.

  • "Resolution order"

    To avail of one of the four resolution tools detailed below, the CBI must make a "proposed resolution order" and then make an ex parte application to Court for a "resolution order". The institution itself, a shareholder, or the holder of a capital instrument or liability affected by a resolution order may apply to Court, within 48 hours of publication of the order, for the order to be set aside.

    The resolution order may provide for (among other matters) the transfer of shares, assets and liabilities, the reduction of principal under a capital instrument or in respect of eligible liabilities (or their conversion into shares), the cancellation of debt instruments (other than secured liabilities), the close out or termination of financial contracts, and the removal and replacement of management by a special manager.

    During the period of the resolution order, the rights of shareholders may be suspended.


  • Sale of business tool

    A resolution order can transfer shares issued by the institution, and/or assets, rights and liabilities of that institution, to a purchaser (which cannot be a bridge institution). Neither shareholder nor third party consent is needed, and procedural requirements under company law or securities law do not need to be met (save as expressly set out in the Irish Regulations). The transfer must be on commercial terms. Where only some of the assets and liabilities are sold, the residual entity will be wound up.

  • Bridge institution tool

    A resolution order can transfer shares issued by the institution, and/or assets, rights and liabilities of that institution, to a bridge institution. Again, neither shareholder nor third party consent is needed, and procedural requirements under company law or securities law do not need to be met. Where only some of the assets and liabilities are transferred, the residual entity will be wound up. A bridge institution would be established by the CBI under the Companies Act 2014, and would be wholly or partially owned by public authorities (which could include the CBI).

  • Asset separation tool

    A resolution order may transfer all or any rights, assets or liabilities of an institution under resolution, or a bridge institution, to one or more asset management vehicles. Again, neither shareholder nor third party consent is needed, and procedural requirements under company law or securities law do not need to be met. The relevant asset management vehicle may be the subject of directions from the CBI, and must manage the assets with a view to maximising their value by selling them or winding them down.

  • Bail-in tool (not available until 1 January 2016)

    The CBI may use the bail-in tool to recapitalise an institution which meets the conditions for resolution, or to convert to equity or write down the principal amount of claims or debt instruments that are transferred under the bridge institution tool, the sale of business tool or the asset separation tool.

    Certain liabilities cannot be the subject of the bail-in tool. These are covered deposits (only as regards the amount actually covered – any excess may be bailed-in), covered bonds, liabilities used for hedging purposes which are secured in a manner similar to covered bonds, liabilities arising by virtue of the institution holding client monies or client assets, liabilities deriving from the institution acting as a fiduciary, liabilities to other institutions with a maturity of less than 7 days, certain liabilities to employees, liabilities to deposit guarantee schemes, preferred debts owing to the Revenue Commissioners or the Minister for Social Protection, liabilities to commercial or trade creditors in respect of goods and services that are critical to the institution's daily functioning, liabilities arising from client monies or client financial instruments where the institution is an investment firm, and liabilities to systems designated under the Settlement Finality Directive. Secured assets related to a covered bond pool cannot be the subject of a bail-in, and must be kept segregated with sufficient funding. In limited circumstances, where any secured liability in respect of a covered bond pool exceeds the value of the collateral secured, the excess part of the secured liability may be the subject of a bail-in.

    From 1 January 2016 onwards, when an institution enters into an agreement in respect of liabilities or relevant capital instruments governed by the laws of a non-EU country, that institution must procure the inclusion in that agreement of a contractual term noting that the liability or instrument may be subject to write-down and conversion powers under the BRRD.


The Bank and Investment Firm Resolution Fund (the Irish Fund) was established under the Irish Regulations, and will be administered by the CBI. The CBI may use the Irish Fund in connection with the application of resolution tools, and it will be financed by annual contributions from all institutions authorised in the State (and branches of EU institutions operating in the State). The CBI has the ability to prescribe the level of annual contribution. If the Irish Fund is insufficient, the CBI is empowered to raise extraordinary contributions from those institutions (subject to a cap of 3 times the annual contribution target set for those institutions) and also to raise funds from other institutions and third parties (i.e. by way of debt).

This funding arrangement will change slightly when the Single Resolution Mechanism becomes effective on 1 January 2016 – the contributions raised by the CBI will instead be transferred to the Single Resolution Fund, rather than the Irish Fund.


Temporary restrictions may be imposed on creditors and counterparties, as part of the resolution framework, as regards exercising termination rights and enforcing security.

However, certain protections are also available under BRRD, including the following:

  • the carrying out of a valuation to determine whether a shareholder or creditor incurred, as part of a resolution tool, losses greater than they would have incurred had the institution entered normal insolvency proceedings, with compensation payable if that is the case;
  • in respect of modified contracts or partial property transfers:
    • a restriction on a partial transfer of rights and liabilities under set-off, netting or title transfer financial collateral arrangements (either all or none may be transferred);
    • where liabilities are secured under a security arrangement, everything must be transferred together, i.e. the assets, the liability and the benefit of the security;
    • a partial property transfer cannot facilitate the transfer of some but not all of the assets, rights and liabilities which form part of a structured finance deal;
  • there are also protections for trading, clearing and settlement systems in the case of partial transfers.



The BRRD requires the preparation, by the EBA, of a number of binding guidelines, together with regulatory technical standards (RTS) and implementing technical standards (ITS) which will form the basis of delegated regulations to be adopted by the European Commission.

Guidelines finalised by the EBA relate to the range of scenarios to be used in recovery plans; the minimum list of qualitative and quantitative recovery plan indicators; the specification of measures to reduce or remove impediments to resolvability; triggers for early intervention measures; tests, reviews and exercises that may lead to extraordinary public support measures; and how to interpret circumstances where an institution is failing or likely to fail.

RTS and ITS finalised to date (and awaiting publication as Commission Delegated Regulations) cover matters including the content and assessment of recovery plans and resolution plans; resolvability assessments; how information is to be provided for resolution plans; independent valuations; and the minimum requirement for own funds and eligible liabilities.


Banks that are subject to the BRRD regime are no longer subject to the existing Irish resolution regime under the Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act) (save for Part 7 of the Resolution Act, which deals with the liquidation of "designated credit institutions" (i.e. banks, building societies and credit unions)). Credit unions will continue to be subject to the Resolution Act as they are not subject to the BRRD regime.

The transposition of the BRRD by way of the Irish Regulations requires institutions, competent authorities and the CBI to actively continue to invest time and resources in developing, assessing and finalising recovery and resolution plans, and assessing resolvability. Further practical guidance will become available as Level 2 measures are developed and finalised, and we will be issuing further briefings as these Level 2 measures develop to highlight key aspects of those measures for institutions subject to the Irish BRRD regime.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions