EU Lenders Need Back Up Plans for Disaster Strategies, EBA SaysBen Moshinsky
European Union financial watchdogs should have back up plans ready in case they hit unforeseen difficulties when attempting to wind down failing lenders, the bloc’s top banking regulator said.
All banks must provide so-called resolution plans, which give details on how to wind them down in an orderly fashion, under proposed rules published by European Banking Authority on its website today. They should be tailored to the individual lenders’ business models and structure, the EBA said.
“Resolution authorities should clearly identify a single preferred resolution strategy, but may also need to include variant strategies to be applied in circumstances in which implementation of the preferred strategy is not feasible,” the EBA said in the statement.
The guidelines form part of a legislative package designed to protect taxpayer money in the event of a financial crisis. EU governments provided 592 billion euros ($807 billion) to support banks from October 2008 through the end of 2012, according to the European Commission.
The approach to banks in crisis has varied. The Netherlands nationalized SNS Reaal NV last year without writing down unsecured senior debt holders, while such creditors were targeted as part of the euro area’s bailout of Cyprus.