Are there exceptions to dealing with failing banks?

Are there exceptions to dealing with failing banks?

The implementation of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) were created to provide guidance on how to deal with failing banks. KPMG looks into how the BRRD and SRMR have dealt with three different cases in recent months.

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Are there exceptions to dealing with failing banks? - photo rubber lifesaver ring

The implementation of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) was supposed to clarify how the authorities should deal with failing banks in Europe.

The use of resolution tools was intended to enable critical economic functions to be provided to a failing systemically important bank - without taxpayer support. It would allow this to continue while losses were absorbed and the failing bank was recapitalised and/or restructured. Smaller failing banks should be put into liquidation, with retail and small SME depositors protected through deposit guarantee schemes.

However, three recent cases illustrate that while the BRRD resolution tools can be used quickly and effectively in some circumstances, exceptions to the core BRRD approach may become the new norm.

This article analyses the contrasting approaches and outcomes of these three recent cases, namely:

  1. Banco Popular Español;
  2. Banca Popolare di Vicenza and Veneto Banca; and 
  3. Monte dei Paschi di Siena. 

For more information contact Andrew Jenke, Partner, Global Portfolio Solutions, KPMG in the UK; Nicholas Colman, Partner, Portfolio Solutions Group, KPMG in the UK; Marcus Evans, Partner, Financial Services, KPMG in the UK; Eric Cloutier, Director, Banking, KPMG in the UK; Clive Briault, Senior Advisor, EMEA Regulatory Centre of Excellence, KPMG in the UK.

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