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Glossary

A

Asset Separation Tool

As defined in Art. 3 (32) SRMR.

Arrangement

An arrangement is any agreement, contract, policy, procedure, guideline or practice governing the provision of a service

B

Back-to-back (booking) Transaction

A pair of legally separate transactions, but with the same terms of trade and involving three parties. One party is the intermediary, as the buyer in one transaction and the seller in the second transaction. This allows institutions to book the transaction in a different place to the original business.

Bail-in

As defined in Art. 3 (33) SRMR.

Bridge Institution

As defined in Art. 3 (31) SRMR.

Business Lines

A structured set of activities, processes and operations that is developed by the institution for third parties to achieve the organisation’s goals.

Business Reorganisation Plan

The restructuring post bail-in should be achieved through the implementation of a business reorganisation plan. Where applicable, such plans should be compatible with the restructuring plan that the entity is required to submit to the Commission under the Union state aid framework. In particular, in addition to measures aiming at restoring the long-term viability of the entity, the plan should include measures limiting the aid to the minimum burden sharing, and measures limiting distortions of competition (Art. 27 (16) SRMR and Art. 52 (12), (13) BRRD).

C

Capital Requirements Directive (CRD)

Directive 2013/36/EU.

Central Counterparty (CCP)

An entity that places itself, in one or more markets, between the counterparties to the contracts traded, becoming the buyer to every seller and the seller to every buyer, and thereby guaranteeing the performance of open contracts.

Central Securities Depository (CSD) An entity that 1) enables securities transactions to be processed and settled by book entry; 2) provides custodial services (e.g. the administration of corporate actions and redemptions); and 3) plays an active role in ensuring the integrity of securities issues.

Clearing

The process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement. Sometimes this term is also used (imprecisely) to cover settlement. For the clearing of futures and options, this term also refers to the daily balancing of profits and losses and the daily calculation of collateral requirements.

College Banks

Banks for which a college has been established, in accordance with Art. 88 BRRD.

Combined Buffer Requirement (CBR)

Total CET1 capital required to meet the requirements for the capital conservation buffer.

Core Business Lines

Business lines and associated services that represent material sources of revenue, profit or franchise value for an institution, or for a group of which an institution is a part.

Critical Financial Market Infrastructure (FMI services)

Payment, clearing, settlement or custody services, provided by an FMI or by an intermediary, which are necessary for the continuity of one or several critical functions

Critical Functions

Activities, services or operations, the discontinuance of which is likely to lead in one or more Member States to the disruption of services that are essential to the real economy or to disrupt financial stability due to the size, market share, external and internal interconnectedness, complexity or cross-border activities of an institution or group, with particular regard to the substitutability of those activities, services or operations.

Critical Functions Report

An SRB reporting requirement for banks to provide information on their self-assessment of critical functions: https://srb.europa.eu/en/content/critical-functions-report

Critical Services

Services, which are necessary for one or more critical functions, that are performed for group business units or entities and whose discontinuity would seriously impede or prevent the performance of those critical functions.

 

D

Dual-hatting

Describes situations where an employee paid by one legal entity provides services to another entity

E

Essential Services

Services associated with core business lines, whose continuity is necessary for the effective implementation of the resolution strategy and any consequent restructuring.

Essential FMI Services

Payment, clearing, settlement or custody services, provided by an FMI or by an FMI intermediary, which are necessary for the continuity of one or several core business lines (please refer to the definition of “Essential services”).

F

FMI Intermediaries

FMI service providers other than FMIs. More often than not, these will be other institutions offering payment, clearing and settlement services, including by way of facilitating indirect access to an FMI.

FMI Report

An SRB reporting requirement for banks to provide information on participation in or membership of FMIs and use of FMI intermediaries for payment, clearing, settlement and custody services: https://srb.europa.eu/en/content/fmi-report

G

Group Entities

Each legal entity that is part of a group.

I

Indirect Holding

In accordance with Art. 1 (114) CRR. Institution A credit institution or investment firm.

Internal Resolution Team (IRT)

IRTs are responsible for preparing resolution plans for banks under the SRB’s remit. They consist of experts from the SRB as well as relevant NRAs. International Securities Identification Number (ISIN) The International Securities Identification Number (ISIN, ISO 6166) is the recognised global standard for unique identification of financial instruments.

M

Material Legal Entities

Subset of group entities. The parent institution must always be included. Material group entities are the most significant entities within the group, whether that be due to the provision of critical funds or through generating a significant portion of the institution’s revenue.

N

No Creditor Worse Off (NCWO)

The No Creditor Worse Off principle states that no creditor of an institution should incur greater losses in resolution than they would have incurred under normal insolvency proceedings.

O

Open Bank Bail-in

In accordance with Art. 27 (1) (a) SRMR.

Operational Plan

art of the Resolvability Work Programme that operationalises the programme through (i) concrete deliverables, (ii) timelines and (iii) milestones.

Operational Assets

An asset that is not a financial asset and that is required to perform relevant services, such as real estate; intellectual property including trademarks, patents and software; hardware; IT systems and applications; and data warehouses. Operational assets are critical/essential where access to them is required in order to perform a critical/essential service

P

Pari passu

The situation where two or more assets, securities, creditors or obligations are treated equally and managed without preference

Preferred Resolution Strategy

Defined as in Art. 2 (3) Delegated Regulation 2016/1075.

R

Relevant Services

Services which underpin (i) the bank’s critical functions to the economy (critical services) and (ii) core business lines (essential services) for which continuity is necessary for the effective implementation of the resolution strategy. These categories may overlap. This applies analogously to operational assets and staff.

Relevant Staff

Employees of the parent or any group legal entity covering relevant roles.

Resolution Entity

A resolution entity means an entity established in the Union, which is identified by the resolution authority as an entity in respect of which the resolution plan provides for resolution action.

Resolution Group

A resolution entity and its subsidiaries that are not i) resolution entities themselves, or ii) subsidiaries of other resolution entities or iii) entities established in a third country that are not included in the resolution group in accordance with the resolution plan and their subsidiaries.

Resolution Reporting Requirements Pursuant to Art. 11 (1) BRRD and Section B of the Annex to the BRRD, as well as Art. 8 (4) SRMR, the SRB collects information for drawing up and implementing resolution plans for banks under its remit. The SRB resolution reporting requirements (Liability Data Report, Critical Functions Report and FMI Report) cover the minimum information required by European Commission Implementing Regulation (EU) 2018/1624 of 23 October 2018 as well as further details required for the respective area. https://srb.europa.eu/en/content/reporting

Resolvability Progress Report

A document reflecting the progress made by the banks in addressing impediments, based on the Resolvability Work Programme. The report should: (i) give sufficient details on the banks’ deliverables against milestones and (ii) help IRTs to update the resolvability assessment at the end of each resolution planning cycle.

Relevant Roles

Job roles whose vacancy in resolution may present an obstacle to the continuity of critical functions and the core business lines needed for the effective implementation of the resolution strategy and any consequent restructuring.

Resolution-resilient features include the following:

  1. Non-termination, suspension or modification Service providers may not terminate, suspend or amend terms and conditions of service provision on the grounds of resolution/restructuring, provided that the substantive obligations under the contract continue to be performed.
  2. Transferability of the service provision Services can be transferred or assigned to a new recipient by the service recipient or the resolution authority because of resolution/restructuring.
  3. Support in transfer or termination In the case of transfer of service provision because of resolution/restructuring, the current provider should ensure the orderly transition of service provision to a new provider or to a new recipient, provided that the substantive obligations under the contract continue to be performed. Where required, including in the case of termination during resolution/restructuring, the provider should ensure continuity of service provision on the same terms and conditions for a reasonable period, e.g. 24 months.
  4. Continued service provision to a divested group entity Services can continue to be provided by the current intra-group provider to entities divested from the group as part of resolution/restructuring. Service provision should continue for a reasonable period following the divestment of the group entity, e.g. 24 months, provided that the substantive obligations under the contract continue to be performed.

S

Sale of Business

As defined in Art. 3 (1) (30) SRMR.

Securities Settlement System

A system that allows the transfer of securities, either free of payment or against payment (deliveryversus-payment). Significant Institution In accordance with Art. 6 (4) of Regulation (EU) No 1024/2013.

Substantive Impediments Procedure

The procedure described under Art. 10 SRMR. Synthetic Holding In accordance with Art. 1 (126) CRR.

T

Third country

A non-EU country.

Transitional Service Agreement

An agreement that determines the scope (and other aspects) of services one company should provide to another when there is a change of ownership.

V

Valuation 1

Valuation 1 is the valuation required under Art. 20 (45) (a) SRRM to assess whether the conditions for resolution, or for write-down or conversion of capital instruments, are met.

Valuation 2

Valuation 2 informs the decision on the appropriate resolution action to be taken and, depending on that action, the decisions on the extent of the cancellation or dilution of instruments of ownership; the extent of the write-down or conversion of relevant capital instruments and eligible liabilities; the assets, rights, liabilities or instruments of ownership to be transferred; and the value of any consideration to be paid. It further ensures that any losses on the assets of the entity are fully recognised. Valuation 2 should include an estimate of the treatment that each class of shareholder and creditor would have been expected to receive if an entity were wound up under normal insolvency proceedings.

Valuation 3

Valuation 3 aims at determining whether or not shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings. In other terms, Valuation 3 aims at assessing any possible breach of the NCWO principle.

Virtual Data Room

A virtual data room is generally intended to be an online facility where documents and information to perform a due diligence are uploaded.