Law no. 312/2015 regarding the recovery and resolution of credit institutions and investment firms (published in the Official Gazette, Part I No. 920 of 12/11/2015), transposing into national law the provisions of Directive 2014/59/EU (BRR Directive), designates the National Bank of Romania as the resolution authority for the banking sector.

Banking resolution is the process of restructuring a credit institution by a resolution authority, using the tools and the resolution powers, to ensure the continuity of the critical function of the said institution (eg. deposits, payment transactions), to restore its viability, wholly or partially, and to liquidate the residual part of the credit institution under normal insolvency proceedings.

As a resolution authority, the National Bank of Romania has responsabilities regarding planning and carrying out of resolution actions.

Resolution planning

In order to ensure the efficiency of potential resolution actions, the National Bank of Romania prepares resolution plans for credit institutions and other entities covered by the specific provisions of Law no. 312/2015, which include measures that could be taken, if needed, in accordance with the established resolution strategy.

The resolution plan contains mainly the following: a demonstration of how critical functions and core business lines could be separated from other functions so as to ensure continuity upon the failure of the institution, identification of major impediments related to the assessment of resolvability and measures to remove them, different resolution strategies that could be applied, arrangements for financing the resolution tools, minimum requirements of own funds and eligible liabilities, options for preserving access to payment services, an estimation of the timeframe for executing each material aspect of the plan. The plan shall be reviewed and updated at least once a year and whenever material changes occur in the institution’s organisational or legal structure, economic activity or financial position that could affect the effectiveness of the resolution plan.

Carrying out resolution actions

The National Bank of Romania carries out resolution actions only when three cumulative conditions are satisfied: the institution is failing or is likely to fail; there are no alternative measures of the private sector/supervisory authority; the resolution action is justified by reasons of public interest.

Resolution actions, which include resolution tools and resolution powers, aim to fulfil any of the following objectives:

1. to ensure the continuity of critical functions;
2. to maintain financial stability;
3. to protect public funds;
4. to protect depositors and investors covered by the relevant legislation;
5. to protect client funds and client assets.

The resolution tools that can be used, individually or in any combination, are:

• the sale of business tool;
• bridge institution tool;
• the asset separation tool (only together with another tool);
• bail-in tool.

In case of a cross-border banking group, the decisions are taken within the resolution college.

Minimum requirements of own funds and eligible liabilities

To ensure the efficiency of the bail-in tool, the National Bank of Romania lays down minimum requirements for own funds and eligible liabilities - MREL for each institution.

Bank resolution at the National Bank of Romania

In accordance with the provisions of the BRR Directive, the resolution function at the National Bank of Romania is operationally independent, structurally separated from and subject to separate reporting/subordination lines from the credit institution supervision function, as well as from the other central bank functions.