Subject matter

Pursuant to Article 32(6) of Directive 2014/59/EU, these Guidelines intend to promote the convergence of supervisory and resolution practices regarding the interpretation of the different circumstances when an institution shall be considered as failing or likely to fail.

For this purpose, these Guidelines provide a set of objective elements that should support the determination that an institution is failing or likely to fail, in accordance with the circumstances laid down in Article 32(4)(a),(b) and (c) of Directive 2014/59/EU. When such a determination is made by the competent authority, it will be based on the outcomes of the SREP performed in accordance with Article 97 of Directive 2013/36/EU and further specified in the SREP Guidelines. In this respect the resolution authority may have to interpret the outcomes of the SREP when consulted by the competent authorities in accordance with Article 32(1)(a) of Directive 2014/59/EU.

These Guidelines do not purport to constrain the ultimate discretion of the competent authority and of the resolution authority in making the determination that an institution is failing or likely to fail. The identification that an objective element enlisted in Title II of these Guidelines has materialised in respect of a particular institution should not lead the competent or the resolution authority as the case may be, to the automatic determination that the institution is failing or likely to fail or result in an automatic application of resolution tools. Similarly, the list of objective elements specified in these Guidelines is not exhaustive and should remain open since not all crisis circumstances can be reasonably foreseen.

These Guidelines should be read in conjunction with the conditions laid down in Article 32(1)(b) and (c) of Directive 2014/59/EU, which specify the other two requirements, in addition to ‘failing or likely to fail’, that need to be met for taking resolution actions. As a consequence, the determination that an institution is failing or likely to fail made by the competent authority and/or the resolution authority in compliance with these Guidelines, does not in itself entail that all conditions to take resolution actions are met. For sake of completeness it is worth keeping in mind that pursuant to Article 32(1)(b) and (c) of Directive 2014/59/EU respectively, the taking of resolution action is also subject to the absence of alternative private sector or supervisory action that can be taken to remedy the situation within a reasonable timeframe, and that the resolution action is necessary in the public interest.

The provisions in these Guidelines should also apply when a determination that an institution is failing or likely to fail is conducted by the relevant authority in the context of determining that an institution is no longer viable for the purpose of exercising the write-down and/or conversion power in accordance with Article 60 of Directive 2014/59/EU.