EUROPEAN UNION: Commission Refers Six Member States to the Court of Justice for Failing to Transpose EU Rules on Bank Recovery and Resolution

Monday October 26 2015

The European Commission has decided to refer the Czech Republic, Luxembourg, the Netherlands, Poland, Romania and Sweden to the Court of Justice of the EU over failure to transpose legislation on Bank Recovery and Resolution (BRRD).

The Directive (2014/59/EU) is a centre-piece of the regulatory framework that was put in place to create a safer and sounder financial sector in the wake of the financial crisis. It is also important for the EU`s Banking Union. The new BRRD rules equip national authorities with the necessary tools and powers to mitigate and manage the distress or failure of banks or large investment firms in all EU Member States. The objective is to ensure that banks on the verge of insolvency can be restructured without taxpayers having to pay for failing banks to safeguard financial stability. To this end, they provide inter alia for shareholders and creditors of the banks to pay their share of the costs through a “bail-in” mechanism. It is crucially important that such rules are in place in all Member States. The deadline for the transposition of these rules into national law was 31 December 2014 (IP/14/2862).

The Commission sent a reasoned opinion to 11 EU Member States on 28 May 2015 (IP/15/5057), asking them to transpose the BRRD. As full transposition of the new rules did not occur in six EU Member States, they are now being referred to the Court.

Referrals to the Court imply the imposition of, at least, a daily penalty payment until full transposition has taken place. The amount of such penalties are calculated in a way that takes into account the payment capacity, the duration and degree of seriousness of the infringement of the Member State concerned. The Commission can decide to withdraw this case in the event that a Member State implements the EU rules in question.

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