Resolution
The Bank Recovery and Resolution Directive (BRRD) provides that each Member State shall designate a resolution authority that can apply the resolution tools and exercise the resolution powers. In Malta, it is the Board of Governors of the Malta Financial Services Authority (MFSA) that acts as the Resolution Authority, which delegates its powers to the Resolution Committee, in accordance with the MFSA Act. The Resolution Function’s role is further stipulated in the same Act and as provided for by the Resolution Committee.
The Resolution Function is responsible for drafting resolution plans for banks and certain investment services firms, advises the Resolution Committee on whether an institution should go into liquidation or resolution and the application of resolution tools when necessary.
Moreover, the Resolution Function also administers the requirements emanating from the BRRD, the Single Resolution Mechanism (SRMR), the Recovery and Resolution Regulations (RRR) and the Intergovernmental Agreement (IGA) on the transfer of contributions to the Single Resolution Fund.
Lastly, the Resolution Function interacts regularly with European institutions, particularly with the Single Resolution Board (SRB), due to its role as the central resolution authority within the Banking Union. It also interacts with local authorities, such as the Ministry responsible for Finance, to carry out its work.
Resolution
The Single Resolution Fund (SRF) is an essential element of the Single Resolution Mechanism (SRM). Where necessary, the SRF may be used to ensure the efficient application of resolution tools and the exercise of the resolution powers conferred to the Single Resolution Board (SRB) by the SRM Regulation (EU) No 806/2014 (SRMR). It can also be used for institutions under the direct remit of National Resolution Authorities, which would result in the SRB taking over the resolution process for that particular institution using the SRF. The SRF has, since 2016, pooled contributions raised at national level from credit institutions as defined in the Bank Recovery and Resolution Directive 2014/59/EU (BRRD), within the participating Member States. The aim is for the SRF to reach its target by 2023 (the initial period) in line with article 69 of the SRMR.
According to Article 70(1) of the SRMR, the individual contribution of each institution towards the SRF “shall be raised at least annually and shall be calculated pro-rata to the amount of its liabilities (excluding own funds) less covered deposits, […] of all institutions authorised in the territories of all of the participating Member States”.
Calculating these contributions is the responsibility of the SRB and so the SRB determines how much each institution should contribute to the SRF. Such individual contributions are calculated primarily based on the target level of at least 1% of covered deposits of all credit institutions within the Banking Union. This target level, which shall be reached by the end of the initial period, is also calculated based on the size and risk of each individual institution.
For the SRB to calculate the individual contribution, institutions are required to report data to the SRB. In this respect, institutions must submit the necessary data used in the calculation of these contributions to the MFSA by 31 January of each year. If an institution fails to submit all required data on time, the SRB may use estimates or its own assumptions to calculate the institution’s annual contribution.
The MFSA in its capacity as the Resolution Authority acts as an intermediary between the SRB and institutions eligible to pay contributions and also conducts quality assurance checks to the data submitted by institutions in conjunction with the SRB. The MFSA is also in charge of collecting SRF contributions and transferring them to the SRF by 30 June of each year.
