The Recovery and Resolution Act (RRA), transposing the European Recovery and Resolution Directive (2014/59/EU – BRRD), provides a framework for solving the “too-big-to-fail” issue and hence contributes to strengthening the stability of the Liechtenstein financial system. The BRRD requires EEA Member States to establish a national Resolution Authority vested with specifically designed resolution powers.
The RRA appoints the FMA as the Liechtenstein Resolution Authority. For this function the FMA is obliged to create a separate organizational unit within its organizational structure. The FMA has to ensure that the Resolution Authority is able to exercise its functions operationally independent from the FMA’s other organizational units and to prevent conflicts of interest between the resolution functions and the FMA’s other functions. For this reason the FMA has established a separate (resolution) unit which directly reports to the FMA’s executive board in its capacity as the FMA’s resolution board (in which the representative of the FMA’s Banking Division has no voting rights) and whose personnel is not affiliated to any of the FMA’s four operational Divisions.
The Resolution Authority has assumed its function on January 1, 2017.
The Resolution Authority, amongst others, is tasked with drawing up resolution plans. It is authorized – having regard to the resolution objectives – to apply the resolution tools and to exercise its resolution powers (RAA Article 82).
The resolution objectives are:
- to ensure the continuity of critical functions;
- to avoid a significant adverse effect on the financial system;
- to protect public funds by minimizing reliance on extraordinary public financial support;
- to protect covered deposits and investments;
- to protect client funds and client assets.
The resolution tools are the following:
- the sale of business tool;
- the bridge institution tool;
- the asset separation tool;
- the bail-in tool.
In taking over the function of the national Resolution Authority the FMA continues adding important elements to its role of ensuring the stability of the Liechtenstein financial market, the protection of clients and the implementation of and compliance with recognized international standards.