Recovery and resolution

Financial Stability Report 2021

Liechtenstein’s Recovery and Resolution framework is based on the EU’s Recovery and Resolution Directive (BRRD). The respective national legislation, the Recovery and Resolution Act, entered into force at the beginning of 2017. The Liechtenstein Resolution Authority participates in the work of the European Banking Authority (EBA) with regard to recovery and resolution matters.

In 2021, the Liechtenstein Resolution Authority has made substantial progress in the drafting of resolution plans and resolution strategies for all Liechtenstein banks. The initial set of plans is expected to be finalized by the end of 2021. The Resolution Authority’s work has benefited from the successful implementation of the resolution reporting framework, which includes the EBA resolution reporting templates as well as national reporting requirements. The first reporting cycle via the FMA’s reporting platform was successfully completed at the beginning of 2021. In the context of resolution planning, the Liechtenstein Resolution Authority has been involved in several resolution colleges regarding internationally active banking groups with its European peers. With regard to Liechtenstein based banking groups, the Resolution Authority fulfils the role of the Group Level Resolution Authority responsible for establishing and heading the colleges.

As in previous years, the Liechtenstein Resolution Authority has taken efforts to accommodate some of the specificities of the Liechtenstein banking sector in its resolution plans. To this aim, the Resolution Authority has inter alia liaised with its European peers, such as other Resolution Authorities of the European Economic Area (EEA) as well as the Single Resolution Board (SRB). The build-up phase of the resolution financing mechanism has further progressed. As of today, the total amount of funds, including irrevocable payment commitments, amounts to around CHF 21 million. As in the EU, the fund’s target sum is 1% of covered deposits. The build-up phase is supposed to end by the end of 2027.

The implementation of the revised BRRD framework (BRRD II) is currently underway. As an EEA member, Liechtenstein is obliged to transpose EEA-relevant EU legislation into its national legal order. Therefore, the revised BRRD framework (BRRD II) will also be implemented in Liechtenstein. The Liechtenstein Resolution Authority has been involved in the respective regulatory work. Since BRRD II will lead to changes with regard to the MREL-framework, binding MREL decisions based on BRRD II may only be taken after the entry into force of the respective national legislation. The entry into force of the revised recovery and resolution framework is expected by the end of 2022 or the beginning of 2023.

Financial Stability Report 2021