Coherent responsibility for bank crisis management powers

Press release 31 October 2014

The authority responsible for bank crisis management should also be given all of the powers associated with resolution planning. A coherent responsibility will ensure that the adverse effects on public funds and the economy from future bank crises are kept to a minimum. This is the main message in the Swedish National Debt Office’s response to the proposal on how to implement the Bank recovery and resolution directive (BRRD) in Sweden.

The Debt Office welcomes the Financial Crisis Committee's proposal for a new Swedish crisis management framework. The new bail-in tool and its underlying power to enforce losses on owners and creditors will reduce the likelihood of tax payers having to foot the bill from future crises. This will make the financial system more robust and serve to uphold market discipline.

The BRRD, which the Committee's proposal seeks to implement, provides member states with limited scope for national adaptions of the harmonised rules. Where national adjustments are warranted, the Committee in general has made balanced and reasonable suggestions.

In contrast to the Committee, however, the Debt Office would like to see all powers associated with the resolution planning procedure given to the authority responsible for resolution. That includes the right to request removal of impediments to resolvability and the assigning of minimum requirements for eligible liabilities.

– The authority dealing with resolution must also have full planning capabilities to be able to fulfil its tasks properly in the case of a bank failure, says Hans Lindblad, Director General of the Debt Office. It would be inappropriate if an authority would be held responsible for and evaluated on measures decided upon by another authority. Such an order would hamper the resolution procedure and blur the accountability aspects. This would be especially problematic given the severe consequences that an inefficient resolution process might have for the economy as well as for individual stakeholders.

The Debt Office's response to the report Resolution – a new method for managing bank crises, pdf (only in Swedish)

Linda Wik, public relations officer, +46 8 613 46 18

The directive of the European Parliament and of the Council (2014/59/EU) establishing a framework for the recovery and resolution of credit institutions and investment firms (BRRD) was adopted in spring 2014. BRRD sets out the rules on how to handle a failing financial institution through the new concept of bank resolution. In Sweden, the Financial Crisis Committee – a group of independent experts appointed by the government – was commissioned to submit a report on how to implement BRRD domestically. The Committee's report (SOU 2014:52) was delivered in July and has since been subject to a public consultation which was due today. The government will draft the final law on the basis of the Committee's suggestions and the responses received during the consultation period. In addition to the proposal for a draft legislative text, the Committee also recommends that the Debt Office is entrusted with most of the resolution tasks and responsibilities stipulated by BRRD.