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REGULATION (EU) No 806/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 15 JULY 2014 2019-2020

Cristina Blasco Maria Catany Desireé Echepare Nanxi Liu

GROUP NUMBER: 6 Cristina Blasco, Maria Catany, Desireé Echepare and Nanxi Liu 1. COMPLETE REFERENCE OF THE ASSIGNED REGULATION Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010. ELI: http://data.europa.eu/eli/reg/2014/806/oj 2. MATERIAL SCOPE AND TYPE OF UNION COMPETENCE IN THIS FIELD Legal base(s): Regarding the legal basis, we can emphasize the Article 114 of the TFEU whereby the Member States have given the EU the necessary powers to adopt a legal act such as the one we are discussing here, in its first paragraph it states: “Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market”. In order to ensure the recognition throughout the Union of judgments and judicial decisions and to facilitate cooperation between the judicial or similar authorities of the Member States, measures shall be adopted in accordance with the ordinary legislative procedure. Union policy: First we highlight the Article 127.6 of the TFEU: “The Council, acting by means of regulations in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings”. Focusing on paragraph seven of our regulation establishes that in relation to the banking union the single supervisory mechanism established by Council Regulation (EU) No 1024/2013 is to ensure that the Union's policy relating to the prudential supervision of credit institutions is implemented in a coherent and effective manner, that the single rulebook for financial services is applied in the same

manner to credit institutions in the euro area Member States and those non-euro area Member States who choose to participate in the SSM, and that those credit institutions are subject to supervision of the highest quality. The Single Supervisory Mechanism (SSM) refers to the system of banking supervision in Europe. It comprises the Economic Central Bank and the national supervisory authorities of the participating countries. Its main aims are to: ensure the safety and soundness of the European banking system, increase financial integration and stability and to ensure consistent supervision. Type of competence: The material scope is the set of competences of the European Union, which are structured in: exclusive, shared or support, coordinate or supplement. The term “shared competences” refers to the “ordinary” competences of the European Union. Unless the Treaties expressly provide otherwise, a union competence will be shared between the EU and the Member States. This does not mean that both legislators (EU and national) act at the same time. To prevent overlapping legislations, the Treaty invokes two principles: the principle of preemption, limiting Member States interference with the EU; and the principle of subsidiarity, which seeks to restrict the Union's legislative action. The Article 4.2 establishes the shared competence between the Union and the Member States applies in many areas. We focus on section c), which deals with economic, social and territorial cohesion. Mention that the Article 5.1 regulates that the Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies. Purpose of the regulation: The Treaty on the Functioning of the European Union deals with the organisation of the functioning of the Union and determines the areas of, delimitation of, and arrangements for exercising its competences. Therefore and in accordance with the competence indicated in the previous paragraph, the regulation and the EU will have to be coordinated in order to comply with all the objectives indicated in Article 14.2 of this Convention. “The resolution objectives referred to in paragraph 1 are the following: a. to ensure the continuity of critical functions; b. to avoid significant adverse effects on financial stability, in particular by preventing contagion, including to market infrastructures, and by maintaining market discipline; c. to protect public funds by minimising reliance on extraordinary public financial support; d. to protect depositors covered by Directive 2014/49/EU and investors covered by Directive 97/9/EC;

e. to protect client funds and client assets. When pursuing the objectives referred to in the first subparagraph, the Board, the Council, the Commission and, where relevant, the national resolution authorities, shall seek to minimise the cost of resolution and avoid destruction of value unless necessary to achieve the resolution objectives ”. 3.- SCOPE OF ANALYSIS AND TASK DISTRIBUTION WITHIN THE GROUP Scope of the analysis: For this part of the assignment we are going to briefly explained the Procedure 2013/0253/COD of our Regulation nº 806/2014. Then we are going to choose four Articles of our Regulation, one for every group member, and we will explain their evolution and their changes. Link: https://eur-lex.europa.eu/legal-content/EN/HIS/?uri=CELEX:32014R0806#1213619 Adoption by Commission: The European Commission is the EU's politically independent executive arm. It is alone responsible for drawing up proposals for new European legislation, and it implements the decisions of the European Parliament and the Council of the EU. Consequently, they are the ones who carry out the proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No 1093/2010 of the European Parliament and of the Council. European Economic and Social Committee opinion: The European Economic and Social Committee (EESC) is an EU advisory body comprising representatives of workers' and employers' organisations and other interest groups. It issues opinions on EU issues to the European Commission, the Council of the EU and the European Parliament, thus acting as a bridge between the EU's decision-making institutions and EU citizens. On 3 September 2013 and 10 September 2013, respectively, the Council and the European Parliament decided to consult the European Economic and Social Committee, under Article 114 of the Treaty on the Functioning of the European Union (TFEU), on the Proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No 1093/2010 of the European Parliament and of the Council COM(2013) 520 final — 2013/0253 (COD). ❖ European Central Bank opinion: The European Central Bank (ECB) is the central bank responsible for monetary policy of those European Union (EU) member countries which have adopted the euro currency. This region is known

as the eurozone and currently comprises 19 members. The principal goal of the ECB is to maintain price stability in the euro area, thus helping preserve the purchasing power of the euro. On 3 September 2013 the European Central Bank (ECB) received a request from the Council of the European Union for an opinion on a proposal for a regulation of the European Parliament and of the Council to give its views on the subject under discussion. Council of the European Union (discussions within the Council or its preparatory bodies, 15/11/2013 and 10/12/2013): In the Council, government ministers from each EU country meet to discuss, amend and adopt laws, and coordinate policies. The ministers have the authority to commit their governments to the actions agreed on in the meetings. Together with the European Parliament, the Council is the main decision-making body of the EU. The Council can: ● Negotiate and adopt EU laws, together with the European Parliament, based on proposals from the European Commission. ● Coordinate EU countries' policies. ● Develop the EU's foreign & security policy, based on European Council guidelines. ● Conclude agreements between the EU and other countries or international organisations. ● Adopt the annual EU budget - jointly with the European Parliament. The Council of the European Union held discussions within the Council or its preparatory bodies on the following dates: 15/11/2013 and 10/12/2013) Finally, on 18th December 2013, the Council of the European Union reached an agreement which was communicated to the European Parliament. European Parliament opinion on first reading (06/02/2014): The European Parliament is the EU's law-making body. It is directly elected by EU voters every 5 years. The last elections were in May 2019. The Parliament has 3 main roles: ● Legislative: ○ Passing EU laws, together with the Council of the EU, based on European Commission proposals ○ Deciding on international agreements ○ Deciding on enlargements ○ Reviewing the Commission's work programme and asking it to propose legislation ● Supervisory: ○ Democratic scrutiny of all EU institutions ○ Electing the Commission President and approving the Commission as a body. Possibility of voting a motion of censure, obliging the Commission to resign ○ Granting discharge, i.e. approving the way EU budgets have been spent

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Examining citizens' petitions and setting up inquiries Discussing monetary policy with the European Central Bank Questioning Commission and Council Election observations

● Budgetary: ○ Establishing the EU budget, together with the Council ○ Approving the EU's long-term budget, the "Multiannual Financial Framework" The European Parliament made a first reading giving its opinion and position, pointing out various items where it did not agree with the Council of the European Union. The reading was then sent to the Council of the European Union, where it held discussions within the Council or its preparatory bodies on 18/02/2014. After making the necessary changes, the draft regulation was sent to the European Parliament for a new reading on 15/04/2014. European Commission position on European Parliament amendments on 1st reading: As set out on the EUR-Lex page, the European Commission accepts the European Parliament's amendments. That is, they come to an agreement. Approval by the Council of the European Parliament position at 1st reading: The Council of the European Parliament carries out a number of legislative deliberations, including the Proposition de règlement du Parlement européen et du Conseil établissant des règles et une procédure uniformes pour la résolution des établissements de crédit et de certaines entreprises d'investissement dans le cadre d'un mécanisme de résolution unique et d'un Fonds de résolution bancaire unique, et modifiant le règlement (UE) n° 1093/2010 du Parlement européen et du Conseil [Première lecture] (AL). They finally adopted the legislative act on 9 July 2014. Signature by the President of the European Parliament and by the President of the Council: Finally, the President of the European Parliament and the President of the Council signed the regulation making it valid and terminating the procedure. The Regulation was published and came into force on 15 July 2014. Now we are going to detail the evolution and changes of the following Articles: Article 3: Taking Article 3 of the proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain

investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation, we proceed to analyze the modifications that have been included in the final text of the Regulation in the referred Article after the pertinent debates in the Council. It can be appreciated that the definitions given in Article 3 of our Regulation are more detailed than in the proposal due to the discussions made by the Council. Whereas in the proposal we find 20 paragraphs, in the Regulation there are 54. The first two paragraphs coincide on both sides, defining the national competent authority and the national resolution authority. Next, the paragraphs are unordered, for instance, while in the proposal is made a reference to "bail-in-tool" in paragraph 18, in the regulation we find it in the paragraph 33. This is because in the Regulation as a result of the debates in the Council, more details are explained, and more paragraphs are used to refer to them. This is the case of paragraph 6, which brings us to paragraphs 8 and 9 for a better understanding of the "resolution plan". Due to the number of paragraphs in the Regulation, we can find some extensions that were not in the proposal. A clear example of this is paragraph 49, which refers to the “eligible liabilities” that means the liabilities and capital instruments that do not qualify as Common Equity Tier 1, additional Tier 1 or Tier 2 instruments of an entity referred to in Article 2 that are not excluded from the scope of the bail-in tool pursuant to Article 27 third paragraph. Another example of a paragraph that was made after the debates of the Council is paragraph 39, related to “debt instruments” that means bonds and other forms of transferable debt, instruments creating or acknowledging a debt, and instruments giving rights to acquire debt instruments. Article 6: Taking Article 6 of the proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation on the publications and use of explosive precursors related to modifications as a starting point, we proceed to analyze the modifications that have been included in the final text of the Regulation in the said Article after the relevant debates in the Council. Therefore, section 2 of the proposal includes the definition of: “When making decisions or taking action, which may have an impact in more than one participating Member State, and in particular when taking decisions concerning groups established in two or more participating Member States, the Commission shall give due consideration to all of the following factors: (a) the interests of the participating Member States where a group operates and in particular the impact of any decision or action or inaction on the financial stability, the economy, the deposit guarantee scheme or the investor compensation scheme of any of those Member States; (b) the objective of balancing the interests of the various Member States involved and avoiding unfairly prejudicing or unfairly protecting the interests of a participating Member State; EN 33 EN (c) the need to avoid a negative impact for other parts of a group of which an entity referred to in Article 2, which is subject to a resolution, is a member; (d) the need to avoid a disproportionate increase in the costs imposed on the creditors of these entities referred to in Article 2, to the extent that it would be greater than the one that they will have incurred had they been resolved through normal insolvency proceedings; (e) the decisions to be taken under Article 107 of the TFEU and referred to in Article 16(10).” Subsequently, it will consider the introduction of an amendment that defines this concept as “ Every action, proposal or policy of the Board, the Council, the Commission, or of a national resolution

authority in the framework of the SRM shall be undertaken with full regard and duty of care for the unity and integrity of the internal market”. After the Council's debates, it is considered necessary to introduce an amendment to the proposal in the sense of including within the new definition as follows: “Every action, proposal or policy of the Board, the Council, the Commission, or of a national resolution authority in the framework of the SRM shall be undertaken with full regard and duty of care for the unity and integrity of the internal market”. On the other part the section 3, regarding the concept of: “The Commission shall balance the factors referred to in paragraph 2 with the resolution objectives referred to in Article 12 as appropriate to the nature and circumstances of each case”. Exposed in the initial text that establishes after the debates the proposed amendment limits itself to replacing the expression extending its content as follows: “When making decisions or taking action which may have an impact in more than one Member State, and in particular when taking decisions concerning groups established in two or more Member States, due consideration shall be given to the resolution objectives referred to in Article 14 and all of the following factors: (a) the interests of the Member States where a group operates and in particular the impact of any decision or action or inaction on the financial stability, fiscal resources, the economy, the financing arrangements, the deposit guarantee scheme or the investor compensation scheme of any of those Member States and on the Fund; (b) the objective of balancing the interests of the various Member States involved and of avoiding unfairly prejudicing or unfairly protecting the interests of a Member State; (c) the need to minimise a negative impact for any part of a group of which an entity referred to in Article 2, which is subject to a resolution, is a member”. Thus, section 4 of the proposal that includes the definition of: “No decision of the Board or the Commission shall require Member States to provide extraordinary public financial support”. After the Council's debates, it is considered necessary to introduce an amendment to the proposal in the sense of including within the definition: “When making decisions or taking actions, in particular regarding entities or groups established both in a participating Member State and in a non-participating Member State, possible negative effects on non-participating Member States, including on entities established in those Member States, shall be taken into consideration”. Finally , after the Council’s debates, it is considered necessary to introduce three new amendments, expanding the content of Article 6 of the regulation, “5. The Board, the Council and the Commission shall balance the factors referred to in paragraph 3 with the resolution objectives referred to in Article 14 as appropriate to the nature and circumstances of each case and shall comply with the decisions made by the Commission under Article 107 TFEU and Article 19 of this Regulation.

6. Decisions or actions of the Board, the Council or the Commission shall neither require Member States to provide extraordinary public financial support nor impinge on the budgetary sovereignty and fiscal responsibilities of the Member States. 7. Where the Board takes a decision that is addressed to a national resolution authority, the national resolution authority shall have the right to specify further the measures to be taken. Such specifications shall comply with the decision of the Board in question”. Article 32: Artic...