Elke König of SRB Outlines Priorities for 2020
The SRB Chair Elke König addressed the ECON Committee of the European Parliament on the status of the current priority areas for SRB and elaborated on the SRB priorities for 2020, highlighting that implementation of the Banking package will be a major priority for the months ahead. She highlighted that the Banking Package strengthens the resolution framework, but also poses implementation challenges for SRB. The key tasks on the agenda include finalization of the new Minimum Requirement for own funds and Eligible Liabilities (MREL) policy by the second quarter of 2020, finalization of the European Deposit Insurance Scheme during this parliamentary term, continued progress toward resolvability assessment, and finding a solution for liquidity in resolution.
The building up of MREL is very important for resolution planning; therefore, SRB has taken a gradual, multi-year approach to MREL, with the goal of maintaining proportionality in the system while preserving a level playing field and upholding high resolution standards across the Banking Union. In the last two resolution planning cycles, SRB has taken binding MREL decisions at consolidated and individual levels. By the end of 2019, SRB will have adopted decisions with MREL targets at the consolidated level for approximately 83% of the banks with resolution plans. Even though the revised Bank Recovery and Resolution Directive (BRRD2) and the Single Resolution Mechanism Regulation (SRMR2) only kick in from December 28, 2020, SRB has already advanced in revising its MREL policy with a view to discuss new policy elements with the participants of the Single Resolution Mechanism and with a view to consulting the industry in early 2020. The goal is to have the new MREL policy ready by the second quarter of 2020. This would allow SRB to start applying it in the course of the 2020 resolution planning cycle and to take MREL decisions based on the new legal framework in the first or second quarter of 2021, when SRMR2 will be applicable and when member states should have transposed the BRRD2.
The SRB Chair pointed out that the new legislation is complex and the resulting framework not only requires banks to continue on their path toward resolvability, but also to follow stricter rules for MREL. The new framework requires firmer conditions for instruments to be considered MREL-eligible; requires a number of banks to meet higher subordination requirements; and calls for banking groups to comply with the internal MREL requirements. SRB is working with the national resolution authorities and is in touch with EC, ECB, and EBA. However, recent experience shows that it will inevitably take some time for authorities to overcome the interpretation and implementation issues. This is another argument for the step-by-step introduction of the new framework, since it is already clear that the level two texts of EBA will be delayed.
Another challenging task that is very high on the SRB agenda is the resolvability assessment. Based on these ongoing efforts, SRB is revising its internal policy on resolvability assessment, to integrate an overall consistent resolvability assessment into the upcoming resolution planning cycle for 2020. Concretely, SRB envisages the creation of a "heat-map" classifying banks in accordance with progress made on each resolvability condition and the relative impact this progress has on the feasibility of the preferred resolution strategy. An area where improvements need to be made is the need for a better alignment between resolution and insolvency, including a bank liquidation regime or harmonized license withdrawal process. She added that a solution for liquidity in resolution is still not in sight. In 2020, SRB continue to increase the Single Resolution Fund while it is hoped that the details around the backstop to the Fund can be worked out and hopefully progress can be made soon—perhaps even in tomorrow’s meeting of the EuroGroup. Finally, SRB would like to see more work to complete and strengthen the Capital Markets Union and hopes that an agreement can be reached on the European Deposit Insurance Scheme, which is the third and final pillar of the Banking Union, during this parliamentary term.
Related Link: Speech
Keywords: Europe, EU, Banking, BRRD, Resolvability Assessment, Banking Package, MREL, Resolution Framework, BRRD2, SRMR2, Single Resolution Fund, SRB
Previous Article
FSB Publishes Summary of November Meeting of RCG for EuropeRelated Articles
US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
EBA Issues Guide on Bank Resolvability, Consults on Transferability
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
FCA Registers Securitization Repositories; PRA Issues 2022 Priorities
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
EC Regulation Sets Out Methods for Measuring K-Factors Under IFR
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
BIS Studies How Platform Models Impact Financial Stability & Inclusion
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
ESAs Publish List of Financial Conglomerates for 2021
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
APRA Licenses Two More Banks, Reduces Committed Liquidity Facility
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.
