The Minister for Finance has designated the Central Bank as the national resolution authority as part of Ireland’s transposition of an EU directive.

While the Central Bank already has resolution powers under domestic legislation, the designation is in line with the bank recovery and resolution directive (BRRD), an EU-wide rulebook that explains how to deal with troubled banks and investment firms.

The BRRD is one of three pillars of the EU’s banking union, which was formed to address key weaknesses in the regulatory framework that emerged during the financial crisis.

Part of this pillar is the single resolution mechanism, which will centralise responsibility for resolving significant and cross border banks to a single resolution board in Brussels from January 1st. The Bank of Ireland, AIB, Ulster Bank, Permanent TSB and Depfa Bank will be under the single resolution mechanism.

National resolution authorities like the Central Bank of Ireland will retain decision making powers in relation to other banks and larger investment firms. Under the BRRD, the Central Bank will have resolution authority over 18 licensed banks and 13 investment firms.

The bank formed a dedicated unit to handle resolution matters, which will report to the director of resolution and corporate affairs, John Coyle.

“During the recent crisis, governments and taxpayers provided support to failing banks. The absence of appropriate resolution tools underlined the importance of establishing a common EU resolution framework to address failure in a timely and orderly manner.

“As the resolution authority the Central Bank will now be in a position to input into resolution matters both domestically and at a European level through participation in the Single Resolution Board,” he said, adding the orderly resolution of failing banks and investment firms without costing the taxpayer or affecting the economy is in line with the bank’s mission of safeguarding financial stability and protecting consumers.