DR MAREK PORZYCKIJAGIELLONIAN UNIVERSITY

Reorganisation and winding-up of credit institutions in the EU

General information

Harmonisation by means of a directive – implementation by national provisions necessary

Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (attention to low quality of the official Polish translation!)

lex specialis in relation to the European Insolvency Regulation (see exclusion in Article 1(2) of the EIR)

Background

Background – cross-border issues:- activities of credit institutions in other (host)

Member States than the home Member State (on the basis of a single authorisation granted by the home Member State) cross-border provision of services, establishing branches

- branches of credit institutions from outside the EU

- credit institutions being subsidiaries of credit institutions from other Member States

Purpose

to guarantee the recognition and effectiveness of reorganisation and winding-up measures on the entire territory of the EU (including Denmark)

some extent of harmonisation of those measures (divergence of national insolvency laws however persists)

maintainig unity between a credit institution and its branches in case of its difficulties ( no secondary proceedings)

Scope of application

credit institutions and their branches in other Member States (as defined in Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions (recast))

branches of credit institutions having a head office outside the EU, only if that institution has branches in at least 2 Member States

‘reorganisation measures’ and ‘winding-up proceedings’ as defined in Article 2 of Directive 2011/24/EC

Reorganisation measures

Exclusive competence of the authorities of the home Member State, extended to branches established in other Member States (Article 3) no secondary proceedings

Law of the home Member State is applicable (Article 3(2))

Full effectiveness of reorganisation measures throughout the whole EU (Article 3(2))

Exchange of information between authorities of Member States (Articles 4-5), publication rules (Article 6), informing creditors in other Member States (Article 7)

Winding-up proceedings

Exclusive competence of the authorities of the home Member State, extended to branches established in other Member States (Article 9(1)) no secondary proceedings

Law of the home Member State is applicable (Article 10)

Automatic recognition and full effectiveness of reorganisation measures throughout the whole EU (Article 9(1))

Informing the authorities of host Member States (Article 9(2), publication rules (Article 13), informing creditors in other Member States (Article 14)

Harmonisation of winding-up proceedings

Duty to consult competent authorities before voluntary winding-up (Article 11)

Withdrawal of a credit institution’s authorisation in case of winding-up following the failure or in lack of reorganisation measures (Article 12)

Protection of local interests in other Member States

Informing creditors (Articles 14, 18)Protection of third parties honouring obligations for the

benefit of credit institutions subject to winding-up (Article 15)

Law applicable to contracts for employment and in respect to immovable property (Article 20)

Protection of third parties’ rights in rem (Article 21)Provisions on netting (Article 25), transactions on

regulated markets (Article 27), repurchase transactions (Article 26)

Provision on pending lawsuit (Article 32)Disposal of immovable assets or assets subject to

registration in a register, account or centralised deposit system (Article 31)

Envisaged reforms – a new EU framework for bank recovery and

resolution

Preparation and prevention – recovery plans to be prepared by banks, resolution plans to be prepared by authorities

Intra-group support agreementsEarly supervisory intervention, including

appointment of a „special manager”Resolution tools: sale of business, „bridge bank”,

asset separation („bad bank”), bail-in (recapitalisation by conversion of debt into equity)

Enhanced cooperation between national authorities and the European Banking Authority (EBA)

Additional reading

Summary of legislation on the EU website http://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_banking/l24008_en.htm

Information on envisaged regulatory reforms on the Commission website http://ec.europa.eu/internal_market/bank/crisis_management/index_en.htm

B.J. Attinger, Crisis management and bank resolution: Quo vadis, Europe?, ECB Legal Working Paper Series, no. 13, December 2011, http://www.ecb.int/pub/pdf/scplps/ecblwp13.pdf