European Resolution And Recovery Framework For Financial Institutions

On 6 January 2011, the European Commission (the "Commission") published a consultation paper on the technical details of a possible EU framework for bank recovery and resolution (the "Consultation Paper").¹ The paper follows the communication from the Commission dated 20 October 2010 on an EU framework for crisis management in the financial sector (the "Communication").²

The need for jurisdictions to ensure they have adequate frameworks to deal with failing institutions at an early stage, in particular to address some of the "moral hazard" issues arising in relation to institutions regarded as "too big to fail," has been a key issue in the international response to the financial crisis. The G-20 leaders' summit in Seoul in November 2010 endorsed the Financial Stability Board's proposals in its report on reducing the moral hazard risk posed by systemically important financial institutions, dated 20 October 2010. The Basel Committee on Banking Supervision