Recovery plans and early interventions

The Bank Recovery and Resolution Directive (2014/59/EU), which is generally referred to as the BRRD, entered into force in the European Union on 1 January 2015. In 2020, the BRRD was amended by Directive (EU) 2019/879 or BRRD II.

The BRRD was implemented in Iceland in two parts:

The BRRD mainly deals with:

  • Recovery plans which financial undertakings, i.e. credit institutions and investment firms, need to have in place and to implement if their operations come under stress.
  • Early interventions applied by supervisory authorities in the activities of financial undertakings and resolution if it is considered necessary for supervisory authorities to take over or intervene in the activities of financial undertakings.
  • Resolution process, resolution plans, minimum requirement for own funds and eligible liabilities (MREL), resolution authority and resolution fund. Further reading  information on the Resolution Authority of the Central Bank of Iceland .

The main elements regarding financial supervision are the following:

Recovery plans

Financial undertakings need to have recovery plans in place on how to respond to possible shocks or stress, cf. Chapter IX A of Act on Financial Undertakings. The recovery plan is the responsibility of the board of a financial undertaking, but it is reviewed by the Financial Supervisory Authority of the Central Bank, which can request improvements if it deems them necessary.

It is important that financial undertakings make recovery plans in accordance with the requirements of the Act and government regulations established on their basis and the technical standards and guidelines that apply to recovery plans, which are listed below:

If a financial undertaking's operational difficulties do not entail a significant negative impact on the financial system, other financial undertakings or the economy, it is assumed that it is permitted to submit a simple recovery plan, cf. Article 82(e) of Act on Financial Undertakings. The evaluation of whether this applies is in the hands of the Financial Supervisory Authority. The evaluation is based on European standards according to derivative regulations on simple recovery plans and resolution plans.

Early interventions etc.

If there has been a shock or a risky situation has arisen and a financial undertaking has already activated or has been obliged to activate its recovery plan in part or in full, the Financial Supervisory Authority can take various measures designed to prevent stress on the financial system. The Authority has the power to make early interventions in the operations of a financial undertaking in difficulty to ensure the continuation of its core activities, cf. Articles 107(c) - 107(e) of Act on Financial Undertakings. Failing that, the Authority determines whether an undertaking is failing or likely to fail, cf. Article 34 of Act on the Resolution of Credit Institutions and Investment Firms , which is a precursor to resolution proceedings.

Group financial support

Financial undertakings and other undertakings within a group are authorised to enter into special financial support agreements within the group, cf. Articles 109(o) - 109(t) of Act on Financial Undertakings. More information regarding group financial support:


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