Recital (8)

Early intervention measures were introduced to enable competent authorities to remedy the deterioration of the financial and economic situation of an institution or entity and to reduce, to the extent possible, the risk and impact of a possible resolution. However, due to a lack of certainty regarding the triggers for the application of those early intervention measures and partial overlaps with supervisory measures, early intervention measures have seldom been used. The conditions for the application of those early intervention measures should therefore be simplified and further specified. To dispel uncertainties concerning the conditions and timing for the removal of an institution or entity’s management body and the appointment of temporary administrators, those measures should be explicitly identified as early intervention measures and their application should be subject to the same triggers. Under specific conditions, a gradual wind-down of activities can be a cost-effective solution facilitating an institution or entity with a weak business model to exit the market, thus avoiding a protracted decline that culminates in the failure of the institution or entity. Competent authorities should have the early intervention power to request the submission of a plan to be implemented in the case of a voluntary wind-down of an institution or entity’s activities, while leaving the decision about the implementation of such plan to the institution or entity concerned. When applying early intervention powers, competent authorities should be required to choose the appropriate measures to address a specific situation in compliance with the principle of proportionality. To enable competent authorities to take into account reputational risks or risks related to money laundering or information and communication technology, competent authorities should assess the conditions for the application of early intervention measures not only on the basis of quantitative indicators, such as capital or liquidity requirements, level of leverage, non-performing loans or concentration of exposures, but also on the basis of qualitative triggers. The decision-making process in relation to early intervention measures should allow for their swift consideration and, if appropriate, their application, in order to avoid any further worsening of the situation of the institution or entity.