Single Resolution Board (SRB) Overview
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Questions and Answers

What is primarily at stake when a bank is failing and requires resolution action?

  • Protection of taxpayers' money
  • Regulation of monetary policy
  • Preservation of the bank's critical functions (correct)
  • Enhancement of bank profitability

    • Which resolution tool allows for the disposal of a bank’s assets to a private purchaser?

  • Asset separation
  • Bail-in
  • Bridge bank
  • Sale of business (correct)

    • Under what conditions can a bank be put into resolution?

  • When it achieves a temporary profit increase
  • When it has sufficient capital reserves
  • When shareholders request a change in management
  • When it is Failing Or Likely To Fail and no other measures are effective (correct)

    • Which resolution tool is specifically designed to manage a failing bank's assets without disrupting its operations significantly?

    <p>Bridge bank</p> Signup and view all the answers

    Who has the authority to determine if a bank meets the conditions for resolution?

    <p>Relevant authorities</p> Signup and view all the answers

    What is the primary intention behind using resolution tools on a failing bank?

    <p>To ensure the continuity of vital banking functions</p> Signup and view all the answers

    What does the bail-in tool do during a bank's resolution?

    <p>Converts debt and equity to mitigate losses on the public</p> Signup and view all the answers

    What is true regarding public interest when considering bank resolution actions?

    <p>It necessitates that objectives are not met through normal insolvency processes</p> Signup and view all the answers

    Who bears the first losses in an institution's financial distress?

    <p>Shareholders of the institution</p> Signup and view all the answers

    What is the prescribed protection level for covered deposits under the Deposit Guarantee Scheme Directive?

    <p>€ 100,000</p> Signup and view all the answers

    Which of the following statements about creditor losses in a resolution scenario is accurate?

    <p>No creditor shall incur greater losses than in normal insolvency proceedings.</p> Signup and view all the answers

    What must occur regarding management when an institution is under resolution?

    <p>Management must be replaced unless necessary for resolution objectives.</p> Signup and view all the answers

    What does the procedure for putting an entity into resolution involve after a determination by the SRB?

    <p>The SRB adopts a resolution scheme and may involve the SRF if needed.</p> Signup and view all the answers

    What is the role of the Council of the European Union in the resolution scheme process?

    <p>To express an objection or approval within 24 hours after SRB sends the scheme.</p> Signup and view all the answers

    How are creditors treated in terms of loss incurrence during a bank's resolution?

    <p>Creditors' losses are incurred in accordance with their priority claims.</p> Signup and view all the answers

    Under what circumstances can natural and legal persons be held liable for an institution's failure?

    <p>Under national law, both civil and criminal law apply.</p> Signup and view all the answers

    What is the main purpose of the resolution planning conducted by the SRB?

    <p>To obtain a comprehensive understanding of the banks and their critical functions</p> Signup and view all the answers

    What is the minimum contribution to loss absorption or recapitalization required from shareholders and creditors before the SRB may use the SRF?

    <p>8% of total liabilities including own funds</p> Signup and view all the answers

    What is the target level of the SRF by December 31, 2023?

    <p>1% of the amount of covered deposits of all credit institutions</p> Signup and view all the answers

    In terms of the SRF, what does the transitional period involve?

    <p>A transitional period of eight years before full mutualization</p> Signup and view all the answers

    Which step is NOT part of the resolution planning process?

    <p>Increasing shareholder dividends during a crisis</p> Signup and view all the answers

    What is the role of the NRAs in relation to the SRF?

    <p>To raise funds at the national level through contributions from the banking sector</p> Signup and view all the answers

    As of July 2016, how much had been collected in contributions towards the SRF?

    <p>EUR 10.8 billion</p> Signup and view all the answers

    Which aspect is not included in the strategic business analysis of a bank?

    <p>Financial performance in the stock market</p> Signup and view all the answers

    Which banks fall under the direct remit of the Single Resolution Board (SRB)?

    <p>Banks that are significant or have been directly supervised by the European Central Bank.</p> Signup and view all the answers

    What does the Single Resolution Mechanism (SRM) primarily aim to achieve?

    <p>Ensure the orderly resolution of all banks in participating Member States.</p> Signup and view all the answers

    Which directive forms the basis of the powers entrusted to the Single Resolution Board?

    <p>Bank Recovery and Resolution Directive (BRRD).</p> Signup and view all the answers

    What key mechanism is NOT included in the Bank Recovery and Resolution Directive (BRRD)?

    <p>Direct control over bank mergers.</p> Signup and view all the answers

    What is the ultimate goal of the Bank Recovery and Resolution Directive (BRRD)?

    <p>To prevent disruptions in the financial system and the real economy.</p> Signup and view all the answers

    Which of the following is a constitutional element of the Single Resolution Mechanism (SRM)?

    <p>Centralized decision-making power in respect of resolution.</p> Signup and view all the answers

    What type of banks are specifically targeted by the resolution efforts of the SRB?

    <p>Significant banks and cross-border banking groups.</p> Signup and view all the answers

    What role do National Resolution Authorities (NRAs) play within the Banking Union?

    <p>They collaborate with the SRB in bank resolutions.</p> Signup and view all the answers

    What is the primary purpose of the SRM Regulation adopted in July 2014?

    <p>To create a decision-making framework for resolution in the Banking Union.</p> Signup and view all the answers

    In what situation can the SRB directly exercise its powers over banks that fall under an NRA's remit?

    <p>When there is a need to ensure high resolution standards are consistently applied.</p> Signup and view all the answers

    What is one of the specific responsibilities of the SRB regarding the Single Resolution Fund (SRF)?

    <p>To adopt the resolution scheme for any bank requiring SRF utilization.</p> Signup and view all the answers

    Which entity does the SRB cooperate closely with to ensure effective supervision of banks?

    <p>The European Commission and the Single Supervisory Mechanism.</p> Signup and view all the answers

    What role do National Resolution Authorities (NRAs) play in relation to banks not under the SRB's direct remit?

    <p>They are directly responsible for implementing resolution schemes for those banks.</p> Signup and view all the answers

    What is the objective of bank resolution as performed by resolution authorities?

    <p>To restructure a bank while safeguarding public interest and minimizing taxpayer costs.</p> Signup and view all the answers

    What may the SRB issue to an NRA if it finds an impending decision non-compliant?

    <p>A general instruction or a warning.</p> Signup and view all the answers

    What happens if a bank within the SRB's remit meets the conditions for resolution?

    <p>The SRB and relevant NRAs must adopt a resolution scheme.</p> Signup and view all the answers

    Under which condition can the resolution authority transfer assets, rights, and liabilities to the AMV?

    <p>The market for those assets is such that their liquidation could adversely affect financial markets.</p> Signup and view all the answers

    Which of the following is NOT a provision the resolution authority enforces over the AMV?

    <p>The authority must give consent from the shareholders.</p> Signup and view all the answers

    What must be considered when calculating the amount for a bail-in related to funding an AMV?

    <p>A prudent estimate of the capital needs of the AMV.</p> Signup and view all the answers

    What is the purpose of approving the AMV’s management body by the resolution authority?

    <p>To establish effective governance and accountability.</p> Signup and view all the answers

    Which scenario necessitates the use of asset separation power by the resolution authority?

    <p>When there is a risk of adverse effects on multiple financial markets.</p> Signup and view all the answers

    How may consideration for transferred assets be structured when paid by the AMV?

    <p>Through debt issued by the AMV.</p> Signup and view all the answers

    What does the term 'resolution authority' imply in the context of asset management vehicles?

    <p>The entity responsible for resolving financial issues of institutions under distress.</p> Signup and view all the answers

    Which of the following statements best describes the relationship between the AMV and public authorities?

    <p>Public authorities have ownership or control over the AMV.</p> Signup and view all the answers

    Study Notes

    Single Resolution Board (SRB)

    • The SRB is the resolution authority for significant banks and cross-border groups within the Banking Union
    • It works with National Resolution Authorities (NRAs) as part of the Single Resolution Mechanism (SRM)
    • Its mission is to ensure orderly resolutions of failing banks, minimizing impact on the real economy and public finances of participating Member States
    • The SRB's authority covers significant banks, and cross-border groups where parent and subsidiary banks are in different participating Member States
    • A list of banks under SRB's remit is publicly available on its website

    Single Resolution Mechanism (SRM)

    • The SRM handles resolution for all banks in participating Member States within the Banking Union
    • It's one of the pillars of the Banking Union, alongside the Single Supervisory Mechanism (SSM)
    • Centralized resolution decision-making power was given to the SRB in January 2016
    • The SRM's powers come from the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR)

    BRRD (Bank Recovery and Resolution Directive)

    • Aimed at orderly resolution of failing banks without disrupting the financial system or real economy
    • Minimizes taxpayer costs
    • Covers key elements like recovery and resolution planning, early intervention, and cooperation between national authorities

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    Description

    Explore the functions and missions of the Single Resolution Board (SRB) within the Banking Union. This quiz covers the SRB's role as a resolution authority, its collaboration with National Resolution Authorities, and the importance of the Single Resolution Mechanism (SRM) in handling bank resolutions across participating Member States.

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