Meginmál

The Bank Re­cov­ery and Res­ol­u­tion Dir­ect­ive (2014/59/EU), which is gen­er­ally re­ferred to as the BRRD, entered into force in the European Union on 1 Janu­ary 2015. In 2020, the BRRD was amended by Dir­ect­ive (EU) 2019/879 or BRRD II.

The BRRD was im­ple­men­ted in Ice­land in two parts:

The BRRD mainly deals with:

  • Re­cov­ery plans which fin­an­cial un­der­tak­ings, i.e. credit in­sti­tu­tions and in­vest­ment firms, need to have in place and to im­ple­ment if their op­er­a­tions come un­der stress.
  • Early in­ter­ven­tions ap­plied by su­per­vis­ory au­thor­it­ies in the activ­it­ies of fin­an­cial un­der­tak­ings and res­ol­u­tion if it is con­sidered ne­ces­sary for su­per­vis­ory au­thor­it­ies to take over or in­ter­vene in the activ­it­ies of fin­an­cial un­der­tak­ings.

The main ele­ments re­gard­ing fin­an­cial su­per­vi­sion are the fol­low­ing:

  • Re­cov­ery plans
  • Early in­ter­ven­tions etc.
  • Group fin­an­cial sup­port

Re­cov­ery plans

Fin­an­cial un­der­tak­ings need to have re­cov­ery plans in place on how to re­spond to pos­sible shocks or stress, cf. Chapter IX A of Act on Fin­an­cial Un­der­tak­ings. The re­cov­ery plan is the re­spons­ib­il­ity of the board of a fin­an­cial un­der­tak­ing, but it is re­viewed by the Fin­an­cial Su­per­vis­ory Au­thor­ity of the Cent­ral Bank, which can re­quest im­prove­ments if it deems them ne­ces­sary.

It is im­port­ant that fin­an­cial un­der­tak­ings make re­cov­ery plans in ac­cord­ance with the re­quire­ments of the Act and gov­ern­ment reg­u­la­tions es­tab­lished on their basis and the tech­nical stand­ards and guidelines that ap­ply to re­cov­ery plans, which are lis­ted be­low:

If a fin­an­cial un­der­tak­ing's op­er­a­tional dif­fi­culties do not en­tail a sig­ni­fic­ant neg­at­ive im­pact on the fin­an­cial sys­tem, other fin­an­cial un­der­tak­ings or the eco­nomy, it is as­sumed that it is per­mit­ted to sub­mit a simple re­cov­ery plan, cf. Art­icle 82(e) of Act on Fin­an­cial Un­der­tak­ings. The eval­u­ation of whether this ap­plies is in the hands of the Fin­an­cial Su­per­vis­ory Au­thor­ity. The eval­u­ation is based on European stand­ards ac­cord­ing to de­riv­at­ive reg­u­la­tions on simple re­cov­ery plans and res­ol­u­tion plans.

Early in­ter­ven­tions etc.

If there has been a shock or a risky situ­ation has arisen and a fin­an­cial un­der­tak­ing has already ac­tiv­ated or has been ob­liged to ac­tiv­ate its re­cov­ery plan in part or in full, the Fin­an­cial Su­per­vis­ory Au­thor­ity can take vari­ous meas­ures de­signed to pre­vent stress on the fin­an­cial sys­tem. The Au­thor­ity has the power to make early in­ter­ven­tions in the op­er­a­tions of a fin­an­cial un­der­tak­ing in dif­fi­culty to en­sure the con­tinu­ation of its core activ­it­ies, cf. Art­icles 107(c) - 107(e) of Act on Fin­an­cial Un­der­tak­ings. Fail­ing that, the Au­thor­ity de­term­ines whether an un­der­tak­ing is fail­ing or likely to fail, cf. Art­icle 34 of Act on the Res­ol­u­tion of Credit In­sti­tu­tions and In­vest­ment Firms , which is a pre­cursor to res­ol­u­tion pro­ceed­ings.

Group fin­an­cial sup­port

Fin­an­cial un­der­tak­ings and other un­der­tak­ings within a group are au­thor­ised to enter into spe­cial fin­an­cial sup­port agree­ments within the group, cf. Art­icles 109(o) - 109(t) of Act on Fin­an­cial Un­der­tak­ings. More in­form­a­tion re­gard­ing group fin­an­cial sup­port: