Mr. Patrick Casey:

During the crisis the banks had to be recapitalised using taxpayer resources and among the failings was the fact that national authorities did not have appropriate tools to impose losses on creditors. The banks did not have adequate loss-absorbing capacity and the purpose of the MREL and TLAC frameworks is to create loss absorbency so that, in the future, burden sharing can fall on shareholders and creditors rather than on the taxpayer. There was also an absence of a harmonised approach across the EU and different countries tackled the issue of bank failure in different ways. Over a period of time Ireland played its part in that, but other countries adopted different methods of dealing with essentially the same problem.

The bank recovery and resolution directive, BRRD, which was transposed in Ireland in July 2015, introduces a harmonised approach to recovery and resolution planning on an ex antebasis. Banks are now required to prepare recovery plans to ensure they have options to address a deterioration in their financial circumstances. The resolution authorities are required to prepare resolution plans that ensure an appropriate strategy is documented, showing how we have planned for failure and how this plan will be executed. It also has to be in a manner consistent with the public interest.

Supervisory authorities have been given early intervention powers so that if anything looks like it is going wrong it can step in and ask for recovery options to be implemented, such as the removal of management or a change of business strategy or operational structure. Resolution authorities have been given powers to bail in shareholders and creditors and to set up a bridge bank or an asset separation structure, as well as other powers. The framework is supplemented by the single resolution fund for the banks and larger institutions, some 30 of them in the banking union, as well as a national fund for investment firms.