13. In relation to the requirement to change the legal or operational structure of an institution …

In relation to the requirement to change the legal or operational structure of an institution so as to reduce complexity in order to ensure that critical functions may be legally and economically separated from other functions through the application of the resolution tools pursuant to point (g) of Article 17(5) of Directive 2014/59/EU, the following specifications apply:

• (a) Application of this measure should be considered if the resolution authority assesses the legal and operational structure of the institution or group as being too complex or too interconnected to be able to maintain continuity of access to critical functions in a resolution, or to be broken up under a resolution strategy implying a break-up of the group or a wind-down or transfer of certain assets and liabilities.
• (b) If necessary for the effective implementation of an MPE strategy and to ensure that certain sub-groups or entities are separable, resolution authorities should consider requiring groups to organise legal entities following regional blocks or core business lines, in particular if critical functions are attributable to certain business lines while other business lines do not encompass critical functions. This should in particular apply to centralised hedging and risk management, trading and liquidity management, and collateral management, liquidity management or other key treasury and finance functions, unless these functions can be replaced by market transactions with outside parties. In accordance with the resolution strategy, resolution authorities should prevent extensive cross-entity booking and hedging practices, and ensure that entities that are to be resolved separately have sufficient stand-alone booking and risk management. Resolution authorities should consider requiring institutions to put in place effective standalone governance, control and management arrangements in each subgroup or entity.
• (c) Where pursuant to legislative requirements or supervisory decisions a structural separation of certain activities is required, resolution authorities should consider requiring a separation of additional activities if necessary to ensure the credibility and feasibility of the use of resolution tools in each part of the group following the separation.
• (d) Resolution authorities should ensure that subsidiaries which are material to the continuity of critical functions are located in EU or third country jurisdictions that do not pose impediments to resolution.
• (e) If the resolution strategy provides for a break-up of the institution or group or a change of ownership by sale or transfer, resolution authorities should consider requiring the institution to organise critical functions and access to infrastructure or shared services that are necessary for the continuation of critical functions in a way that facilitates their continuity. If necessary to make a resolution strategy credible and feasible, resolution authorities should consider requiring institutions to change their operational structure to reduce or prevent the dependency of material entities or core business lines in each subgroup on key infrastructure, IT, personnel or other critical shared services from different subgroups. This should include management information systems. It should be ensured that adequate governance and control arrangements are in place and the necessary financial resources are available so that internal and external service providers can continue to provide their services.
• (f) Where required to ensure the provision of critical shared services following resolution, resolution authorities should consider requiring institutions to move these services into separate operational subsidiaries. If applying this measure, resolution authorities should consider requiring these operational subsidiaries
• - to limit their activities to the provision of these services and to apply appropriate restrictions regarding risks and activities,
• - to be adequately capitalised to meet their operational costs for an appropriate timeframe,
• - to meet the requirements applicable to an outsourcing of the functions concerned and
• - to provide their services under intra-group contract service level agreements that are robust under resolution.

The terms of these agreements, the governance arrangements of these subsidiaries and their ownership structure should be appropriate to ensure the continuance of the services following resolution.

• (g) Resolution authorities should consider requiring institutions to take precautions to meet, in a resolution situation, the specific requirements of any financial markets infrastructure (FMI) in which they participate, including access to clearing, payment and settlement services for all subgroups and material entities of the subgroup during resolution and, if applicable, for a recipient to whom critical functions have been transferred. Where necessary, resolution authorities should consider requiring institutions to make reasonable efforts to re-negotiate contracts with FMIs accordingly, subject to safeguards to protect the sound risk management and safe and orderly operations of the FMI.
• (h) Resolution authorities should consider requiring institutions to prevent critical dependencies of the institution, group or any subgroup on the provision of services under contracts not under the jurisdiction of EU Member States that permit termination upon the resolution of group entities. A dependency should be deemed critical when it affects critical functions of the institution.
• (i) If an SPE strategy includes a winding down of business lines with non-critical functions, resolution authorities should consider requiring institutions to ensure the separability of these business lines, within or outside the existing structure, including the saleability of certain operations in case the resolution strategy requires their sale. If necessary to ensure separability, resolution authorities should consider requiring institutions to change their structure in third countries from branches to subsidiaries, or to internally segregate all or certain functions and business lines in these branches to prepare a carve-out of these functions and facilitate the transfer to a separate entity.
• (j) If necessary for the effective implementation of an SPE strategy, the funding of subsidiaries by the top company of the group should be adequately subordinated, not be subject to set-off and/or provide for appropriate arrangements for losses to be transferred to the legal entity to which resolution tools would be applied from other group companies, in a way that allows the relevant operating group entities to remain viable. The funding should be structured so that the group or the part of the groups that perform critical functions is not broken up following a write-down and conversion of a considerable portion of the instruments that are subject to write-down and conversion powers. Where the resolution strategy depends on a re-allocation of capital and liquidity within the group, capital and liquidity should be located in jurisdictions where this re-allocation is allowed under local regulatory limits.
• (k) Where necessary to ensure the separability of critical functions from other functions resolution authorities should consider requiring the establishment of a holding company not performing any critical functions under the circumstances set out in point 14(b) below. The considerations under point 14(c) apply accordingly.
• (l) Resolution authorities should consider requiring institutions to take reasonable precautions to ensure availability of, to retain or to substitute key staff where this is necessary to implement the preferred resolution strategy, also with a view to the replacement of the management body and senior management of the institution under resolution required by Article 34(1)(c) of Directive 2014/59/EU.
• (m) Resolution authorities should consider requiring institutions to ensure the continuity of management information systems. Resolution authorities should consider requiring that the institution’s information systems and data availability ensure that authorities are able to obtain the data needed to implement the resolution strategy and carry out valuations before and during resolution. In particular, resolution authorities should consider requiring institutions to ensure the operability of the use of the write-down and conversion powers at the point of resolution by making the identification of liabilities, stays on payments and the technical implementation of the write-down and conversion feasible.
• (n) Resolution authorities should consider requiring institutions to reduce the complexity and size of their trading book if this is necessary to apply the resolution tools, in particular the bail-in tool with regard to large portfolios of derivatives and other financial contracts, to a lack of transparent and accessible structure or the complexity or volatility of measurement and valuation of the products and portfolios in the trading book and their internal interconnectedness.

1. Ülevaade

1.1 Viited

1.2 Tuvastatud nõuded

1.3 Seotud standardid

2. Tuvastatud nõuded

3. Seotud standardid

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/