Question
In accordance with the Directive 2014/59/EU (BRRD), Article 74(4) of CRD IV will expire when BRRD is implemented. Is the proportionality in the CRD IV different from the simplified obligations in the BRRD?
Background on the question
The Member State which has raised the question has implemented Article 74(4) of the CRD IV in a way where it requires all institutions to make a recovery plan. But, after consulting the macro prudential authority the Member State which has in accordance with Article 74(4) modified the requirement in a supplementary law. In this law the Member State establishes that institutions with a balance sheet below EUR 134.4 million (conversion rate of 01/06/2015) are not required to make a recovery plan. For the small banks the Member State considers that their capital contingency plan is sufficient. For small investment firms the Member State considers that they will be handled in accordance with the normal insolvency as they are not taking deposits or providing loans. Can this proportionality be continued when Article 74(4) in the CRD IV is replaced by the BRRD?
Answer
Outright waivers for individual institutions from the obligation to prepare recovery plans are only available in the circumstances outlined in Article 4(8) of Directive 2014/59/EU (BRRD). It may also be worth noting that pursuant to Article 1(1)(a) and definitions in Article 2 (1) (3) and Article 2(23) of the BRRD, small investment firms, i.e. with an initial capital below 730.000 Euro fall outside the scope of the BRRD and, therefore, they are excluded from recovery and resolution planning obligations. Disclaimer: This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.