Recovery and resolution

IN L IECHTENSTEIN Financial Stability Report 2020

The Liechtenstein Resolution Framework is based on international standards, with the EU’s Banking Recovery and Resolution Directive (BRRD) being effective since 2017. In this context, the Liechtenstein resolution authority closely cooperates with European peers. In the framework of a resolution college, a resolution plan for an EU-based banking group with a subsidiary in Liechtenstein was decided upon during summer.

During 2020, the work of the Liechtenstein resolution authority (a separate unit within the FMA) has focused on the further development of resolution plans and resolution strategies for the major Liechtenstein banks. In this context, the reporting framework has been significantly expanded in order to strengthen the data landscape necessary for resolution planning. Furthermore, the work on the resolvability assessment for the banks under the remit of the FMA has been continued. In order to be able to properly address Liechtenstein banking sector specificities in resolution planning, the Liechtenstein resolution authority has further increased its exchange with the relevant banks. The build-up phase of the resolution financing mechanism has continued. The total amount of funds, including irrevocable payment commitments, equals CHF 16 million by the end of 2020. The fund has a target sum of 1% of covered deposits and will be fully built up by the end of 2027.

As part of the Banking Reform Package (CRR II/ CRD V, see previous section), the legal framework for resolution (BRRD) will also change in Liechtenstein. The Liechtenstein resolution authority has been involved in the preparatory work for the implementation of this framework in Liechtenstein. The amended BRRD will inter alia change the legal framework with regards to the calibration of the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). The issuance of MREL decisions for the major Liechtenstein banks is envisaged for 2021 and is an important next step in the course of complementing the resolution framework.