Implementation of the Single Resolution Mechanism in Germany

The German legislator has started to implement the Single Resolution Mechanism ( "SRM" ) into national law. The SRM is based on the Bank Recovery and Resolution Directive (2014/59/EU – "BRRD" ) and the core SRM Regulation (Regulation (EU) No. 806/2014 ) and provides a supranational framework for the orderly liquidation of banks that are failing or likely to fail. The essential provisions of the SRM will apply from 1 January 2016.

The Resolution Mechanism Act (Abwicklungsmechanismusgesetz )

The German Federal Government published a draft bill adjusting the national bank resolution rules to the SRM mechanism (Resolution Mechanism Act) . Although the SRM Regulation is directly binding law in Germany and an implementation act is not necessary, in order to enable the start of the uniform resolution procedures the following legislation needs to be adapted:

• Amendments to the Resolution and Recovery Act (Sanierungs- und Abwicklungsgesetz) in particular concerning the administrative competencies of national authorities and the introduction of the power to issue statutory ordinances relating to recovery plans.

• Adaptions of the Restructuring Fund Act (Restrukturierungsfondsgesetz ) to the requirements of European banking levy and to the requirements for the utilization of the contributions from the European banking levy within 2011 and 2014. Besides the draft bill specifies the regulations for the transfer of the national contributions to the mandatory Resolution Fund.

• Substantiation of the Financial Market Stabilisation Fund Act (Finanzmarktstabilisierungsfondsgesetz ) regarding the financing for the Financial Market Stabilisation Authority ( Bundesanstalt für Finanzmarktstabilisierung ) as resolution authority.

• Amendments to the provisions for the cover assets of public Pfandbriefe in the Pfandbrief Act (Pfandbriefgesetz ).

• Adaptions to the Banking Act ( Kreditwesengesetz ), inter alia the introduction of a special rule for the insolvency of CRR-institutions.

The draft has to be adopted by the German federal parliament (Bundestag) .

The Restructuring Fund Regulation (Restrukturierungsfonds- Verordnung ) Further, on 22 July the Restructuring Fund Regulation concerning the collection of contributions to the restructuring fund for credit institutions was published in the Federal Law Gazette ( Restructuring Fund Regulation ). Subject of the Restructuring Fund Regulation are unregulated aspects of the Delegated Regulation (EU) No. 2015/63. The Delegated Regulation substantiates the details of the collection of the banking levy in accordance with the BRRD. Hereafter the annual contribution to be paid by the institutions and calculated by the resolution authorities consists of a fixed amount (basic annual contribution) and an additional risk adjusted contribution. Competent national authority for the calculation of the contributions

within the contribution period 2015 is the Financial Market Stabilisation Authority. From 2016 on the Single Resolution Board undertakes this task.

Inter alia, the draft of the Restructuring Fund Regulation provides the following:

• Introduction of lump-sum contributions for certain, not group-related investment firms and so called Union branches (third country institutions owing a branch in the EU ( Unionszweigstellen )), which are not covered by the Delegated Regulation.

• The Execution of voting rights provided by the Delegated Regulation regarding the application of the lump-sum contributions upon institutions with a balance sheet total up to 3 billion Euros.

• Substantiation of the requirements for the calculation of the risk adjusted contribution provided by the Delegated Regulation.

• Definition of the risk indicators, which must be stipulated by the resolution authority.

• Substantiation of mandatory reported data to the resolution authority for the calculation of the contributions.

For further information on the SRM see our article here .

For further information on the BRRD see our report here and on the respective German Implementation Act see our report here .

Contact

Dr. Joachim Kaetzler Andreas Feneis Partner (Germany) Counsel (Germany) +49 69 71701 132 +49 69 71701 351 [email protected] [email protected]

2 September 2015

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