One of the lessons learned from the last financial market crisis is that it is of paramount importance to have a dedicated resolution regime for banks so that a framework is in place for dealing with distressed institutions without either using taxpayers’ money or endangering financial stability.
With that in mind, the Key Attributes of Effective Resolution Regimes for Financial Institutions (the “Key Attributes”) developed by the Financial Stability Board (FSB) set out a new resolution regime for banks. The European resolution regime for banks, consisting of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM Regulation), was established on the basis of these.
In Germany, the BRRD was transposed into national law by way of the Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz), which entered into force in 2015.
The European resolution regime’s rulebook for banks was amended in June 2019 by the EU banking package published in the Official Journal of the European Union – the deadline for transposing the revised BRRD into national law is end-2020.
The Recovery and Resolution Act follows the structure of the BRRD in that it can be broken down into three core components: