On September 22, the European Banking Authority (EBA) published final guidelines specifying the types of tests, reviews or exercises that may lead to support measures under Article 32(4)(d)(iii) of the Bank Recovery and Resolution Directive (BRRD).

The BRRD establishes a framework for dealing with unsound or failing credit institutions and investment firms. Article 32(4) of the BRRD stipulates that a firm should be deemed to be failing, or likely to fail, if, among other things, there is a need for extraordinary public support, unless all the conditions listed in Article 32(4)(d) are met.  Under Article 32(4)(d), the EBA is required to issue guidelines on the type of tests, reviews or exercises that may lead to capital shortfalls that may be eligible to be covered by public recapitalization.  Final Guidelines.