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
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BaFin Consults on Resolvability Requirements for Resolution Planning
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
EBA Consults on Certain Standards and Guidelines Under CRR and BRRD
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
OJK Publishes Regulatory Updates for Financial Sector Entities
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
EU Publishes Rules on DLT and Data Governance
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
EBA Publishes Phase 2 of Reporting Framework 3.2
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications