BRRD: EBA publishes RTS on valuation in resolution

The EBA has published a final report on regulatory technical standards (RTS) on valuation in resolution under the Bank Recovery and Resolution Directive (BRRD). The RTS are intended to promote the consistent application of methodologies for valuations in relation to the principles upon which an independent valuer must apply their own judgment and expertise to valuations. The final report sets out two sets of RTS, one covering valuations before resolution and the other covering valuations after resolution.

To conduct a valuation before resolution, the independent valuer is empowered to challenge banks' management assumptions, data, methodologies and judgements on which the institutions prepare their financial statements. After resolution, valuation is important to establish whether the no-creditor-worse-off (NCWO) safeguard has been breached by the resolution action and whether any compensation has to be paid to creditors and shareholders by the resolution fund.

The two sets of RTS complete the EBA's regulatory activity on valuation for the purposes of resolution and will be submitted to the EU Commission for endorsement. The EU Commission has previously endorsed RTS on the independent valuer and RTS on the valuation of derivatives for the purposes of resolution, which have both already entered into force.