The NBS carefully monitors international practice, as well as all initiatives and proposals for changes in relevant international standards and regulations in the area of bank resolution, in order to timely analyse the need, possibility and potential effects of implementing the latest regulatory solutions in the domestic legal framework.
At the international level, the work of the Financial Stability Board stands out in the area of bank resolution. At the initiative of the G20, and as part of the response to the global financial crisis, in 2011 the FSB issued the “Key Attributes of Effective Resolution Regimes for Financial Institutions” (hereinafter: Key Attributes), which represent comprehensive international standards for resolution regimes of all types of globally systemically important institutions (G-SIIs).
In order to enable effective implementation of the new resolution tool introduced by the Key Attributes (bail-in), which was introduced as the opposite to the most commonly used state aid tool (bail-out), in 2015 the FSB developed and published “Principles on Loss-absorbing and Recapitalization Capacity of Globally Systemically Important Banks (G-SIBs) in Resolution, Total Loss-absorbing Capacity (TLAC) Term sheet” (hereinafter: TLAC Standard). The aim of the TLAC Standard is to ensure that institutions, which could potentially go under resolution (because they are “too big to fail”), have a certain minimum capacity to cover losses that would be available for resolution purposes, exceeding minimum capital requirements determined in accordance with the Basel III Standards.
The TLAC Standard defines the minimum conditions which must be met by instruments and liabilities that G-SIBs should always have and these must be available for write-down and conversion within resolution. In addition, the TLAC Standard also requires that a certain amount of these funds be allocated to subsidiaries or subgroups whose headquarters are located outside the country of the parent company’s headquarters, i.e. in the so-called “host jurisdictions”, which are considered significant for the resolution of G-SIBs and the whole group (so-called “internal total loss-absorbing capacity” or “internal TLAC”). In this regard, in July 2017, the FSB published the Guiding Principles on the Internal Total Loss-Absorbing Capacity of G-SIBs (“Internal TLAC”).
In the EU, the Key Attributes have been transposed into legislation through Directive 2014/59/EU on establishing a framework for recovery and resolution of credit institutions and investment firms (hereinafter: Directive). This Directive, better known as the Bank Recovery and Resolution Directive (BRRD), came into force in the member states of the European Union on 1 January 2015.
In November 2016, the European Commission published a proposal to amend the set of financial regulations governing the operations and resolution of banks, which include, among other things, amendments to the Directive. One of the main objectives of the proposed changes is to harmonise the Directive with the TLAC Standard of the FSB.