The Recovery and Resolution Act (RRA), transposing the European Recovery and Resolution Directive (2014/59/EU – BRRD), provides a framework for addressing 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 FMA took over the functions of the national Resolution Authority on January 1, 2017. Within the FMA, the Financial Stability Division is responsible for resolution matters since 1 April 2022.
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.