Banking Union and BRRD Quiz

Collecting deposits from the public and making loans is a core function of a bank, not typical of investment services. Investment services are typically focused on advising and executing transactions on behalf of clients, not directly managing funds.

Emergency liquidity assistance (ELA) is the provision of short-term loans by a central bank to financial institutions experiencing a shortage of liquidity. This is done to prevent a systemic crisis.

Tier 2 capital instruments are considered less loss-absorbing than Tier 1 capital. They are typically subordinated debt or hybrid instruments that provide a cushion for lenders in case of losses.

Once authorized, a credit institution's license can be revoked by the competent authority if they believe the institution poses a serious risk to financial stability. It doesn't require judicial authority intervention.

The European Parliament is not a part of the European System of Financial Supervision. It is the legislative branch of the European Union.

Closed-end investment funds do not allow investors to redeem their shares at any time. Investors can only sell their shares in the secondary market, not directly back to the fund.

Credit institutions established in a Banking Union participating country are subject to the supervision of the Single Supervisory Mechanism (SSM). This is the direct supervision of the European Central Bank (ECB).

The condition of having liabilities exceeding €30 billion is NOT required for a resolution under the BRRD. The key criteria are the institution being failing or likely to fail, and the resolution action being in the public interest.

The transfer of all or part of a business's assets and liabilities to one or more asset management vehicles (AMVs) controlled by public authorities. This is a core resolution tool under the BRRD aimed at protecting the financial system during crises.

A collective investment undertaking that raises capital from multiple investors and invests according to a specific investment policy for their benefit, without requiring authorization under the UCITS Directive. This means they are less regulated than UCITS funds.

A resolution tool that involves using public funds to rescue a struggling financial institution. This is often seen as a last resort in preventing systemic risk.

The 'Single Supervisory Mechanism (SSM)' comprises the European Central Bank (ECB) and national supervisory authorities. These entities oversee and supervise significant banks within the European Union to ensure their financial stability and protect depositors.

The 'Single Resolution Mechanism (SRM)' handles the resolution of failing banks within the Banking Union. This includes the use of resolution tools like bail-in and asset separation to prevent contagion and secure financial stability.

Investment services are activities performed by financial institutions on behalf of clients, such as portfolio management, investment advice, or execution of orders. These services are regulated and require authorization from the relevant authorities.

Portfolio management involves managing a portfolio of investments according to a specific strategy and the client's objectives. This can include asset allocation, security selection, and risk management.

A UCITS (Undertakings for Collective Investment in Transferable Securities) scheme is a regulated type of investment fund that is authorized and supervised by national authorities. These schemes offer a high degree of investor protection and are typically less risky than AIFs.

Investment firms are legal entities whose primary business is providing one or more investment services.

Tier 2 capital instruments are less loss-absorbing compared to Tier 1 capital instruments. They include hybrid instruments and subordinated debt instruments.

Bail-in is a resolution tool where creditors' claims are written down or converted into equity instruments to restore a failing institution's capital.

The European Central Bank (ECB) does not directly authorize credit institutions in the Banking Union. It's the national competent authority that performs this function.

The authorization to carry out banking activity does not require collecting deposits from the public for an amount equal to the minimum initial capital required.

A bail-out refers to rescuing a failing institution using taxpayer money, which is not a resolution tool under the BRRD.

The rules on credit institutions' risk management require a qualified and competent staff, adequate structural organization, and more.

Converting liabilities into units of collective investment schemes managed by the same credit institution is not a resolution tool to restore capital in a failing institution.

The risk management function is an independent unit within a credit institution responsible for identifying, measuring, and reporting all risks. It operates autonomously from other operational functions and receives dedicated resources.

The recovery and resolution system under the BRRD (Bank Recovery and Resolution Directive) applies to a broad range of institutions, including credit institutions and investment firms, to prevent and manage financial distress and failures.

The nomination committee, responsible for overseeing the composition and effectiveness of the management body, evaluates the knowledge, skills, and diversity of the management team both collectively and individually.

The BRRD provides rules for managing the resolution of institutions experiencing financial distress, aiming to minimize disruption to the financial system and protect depositors.

The European Supervisory Agencies (ESAs), the European Central Bank (ECB), and the European Systemic Risk Board (ESRB) are the key components of the European System of Financial Supervision (ESFS).

Credit institutions established in one EU country are allowed to provide their services directly in other EU countries without needing to establish a separate branch.

The act of providing personal recommendations to a client, upon their request or at the initiative of the investment firm, regarding one or more transactions related to financial instruments.

Closed-end funds have a fixed number of shares and their value is not directly tied to the fund's underlying assets. Investors cannot redeem their shares at any time, but must sell them on the secondary market.

Credit institutions are not automatically authorized by the ECB. Each national competent authority, like the Bundesbank in Germany, is responsible for granting the authorization.

Investment advice involves providing personal recommendations to a client, while investment execution involves actually buying or selling financial instruments on behalf of clients.

Closed-end investment funds have a fixed capital structure. Investors cannot sell their shares back to the fund, only in the secondary market.

Closed-end funds can, but don't always, invest in liquid assets. Their value is not tied to the underlying assets because they are not directly redeemable.

"They can invest in liquid assets" is WRONG as the value is not directly linked to the fund's assets.