Today, 26 November 2015, the Act implementing the European Framework for the Recovery and Resolution of Banks and Investment Firms (the “Implementation Act”) has entered into force. The purpose of the Implementation Act is to implement the Bank Recovery and Resolution Directive ("BRRD") into Netherlands law and to facilitate the application of the Single Resolution Mechanism Regulation ("SRM Regulation").
In short, the BBRD and the SRM Regulation have introduced a harmonised European framework for the recovery and resolution of banks and large investment firms (and certain affiliated entities) which are failing or likely to fail. To enable the competent authorities to intervene in a timely manner, the BRRD (after implementation) and the SRM Regulation give them certain tools and powers. To ensure that these tools and powers are effective, the BRRD and SRM Regulation require EU member states to impose various requirements on institutions or their counterparties.
With the entry into force of the Implementation Act, the European recovery and resolution framework now also applies in the Netherlands. The Implementation Act has primarily resulted in additions to and amendments of the Netherlands Financial Supervision Act. As a result thereof, the Netherlands Intervention Act will for the greater part cease to apply to banks and will only apply to insurers.
For a further analysis of the BRRD and the SRM Regulation and for an overview of a number of important changes that the Implementation Act has brought about as from today, reference is made to our previous newsletter on the legislative proposal for the Implementation Act. Reference is also made to our recent newsletter on mandatory bail-in clauses in agreements of banks and investment firms pursuant to the Implementation Act.
The BRRD should have been implemented for the larger part in 1 January 2015. The deadline for the implementation and application of the bail-in tool is 1 January 2016. With the entry into force of the Implementation Act per today’s date, the bail-in tool is also applicable as from today.
With the entry into force of the Implementation Act, the process of harmonisation in the area of recovery and resolution has not yet come to an end. Certain provisions of the BRRD shall be elaborated upon in further detail in delegated European regulations, which, after their entry into force, shall be directly applicable in the Netherlands alongside the Implementation Act. Furthermore, certain topics dealt with in the Implementation Act shall be further regulated in lower level Netherlands legislation.
On 1 January 2016, those parts of the SRM Regulation dealing with recovery and resolution will enter into force and will be applicable to banks in member states participating in the Single Supervisory Mechanism (SSM), i.e. member states within the Eurozone. This set of rules will have direct effect in these member states and prevail over national law. From that moment on, a distinction will have to be made between, on the one hand, the decision-making process with respect to the recovery and resolution of those banks and the tools available in this connection based on the SRM Regulation, and, on the other hand, the execution of those decisions and tools by and the powers available to the national competent authorities based on the implementation of the BRRD. For, in brief, significant banks, significant banking groups and cross-border banking groups the aforementioned decision-making shall be entrusted to a European resolution authority, the Single Resolution Board. For other banks, such as less significant banks, such decision-making shall pursuant to the SRM Regulation in principle be the responsibility of the national competent authorities.
The Implementation Act takes account of the relationship between the BRRD and the SRM Regulation. The Implementation Act implements only those parts of the BRRD that are not covered by the SRM Regulation and reflects the situation as per 1 January 2016. To cover the period as from today until 1 January 2016, the provisions of the Implementation Act on the decision-making process with respect to the recovery and resolution of institutions other than banks will be applicable to banks on the basis of a transitory regime until 1 January 2016.