SRB published a report on its fourth annual conference that was held on October 10, 2019 in Brussels. This year, the discussions focused on the implementation of bank resolution policy. The discussions identified several relevant issues, including completing the Banking Union, the lack of a functioning Capital Markets Union, the need for a more robust framework around liquidity in resolution, and the newfound information technology issues that impede the efficiency of resolution and operational continuity.
Elke König, the SRB Chair, highlighted that an updated Minimum Requirement for own funds and Eligible Liabilities (MREL) policy is to be released in early 2020. In terms of the future work areas, the SRB Chair mentioned the:
- Need for a backstop in the Single Resolution Fund or SRF
- Lingering issue of liquidity in resolution
- Harmonization of insolvency regimes
- Need for a functioning Capital Markets Union
With these needs clearly defined, the conference set an ambitious “to do” list of what should be accomplished now if resolvability is to be successful in future. In comparing the EU to other jurisdictions, the lack of a "single European market" was repeatedly flagged as a cause for concern. With investors still viewing banks on national terms (that is, German versus Italian, instead of European), EU is not an appealing market to investors. While it is for firms to make themselves resolvable, the resolution authorities need to be clear on what this means. Also identified was an overall need for greater clarity and, with it, increased transparency.
Furthermore, in his speech, Dietrich Domanski, the Secretary-General of FSB, focused on elements needed to maintain operational continuity when turning resolution policy into action. In this context, he mentioned the gaps identified in the eighth FSB report on implementation of resolution reforms in the areas of achieving a balance between prepositioned and nonprepositioned total loss-absorbing capacity (TLAC) resources, successful execution of a TLAC bail-in transaction, and liquidity in resolution. According to José Manuel Campa, the EBA Chair, progress has been slow and “... work still needs to be done both from the banks’ point of view and the authorities’ point of view. Only a few authorities have published guidelines on operational continuity.” EBA, he said, is working with supervisory authorities to help them create clear and common guidelines for banks on what is expected—for instance in terms of concretely identifying and mapping critical functions—across resolution authorities.
Keywords: Europe, EU, Banking, Banking Union, SRF Backstop, Single Resolution Board, Annual Conference, Resolution Framework, MREL, Bail-In, Liquidity in Resolution, SRB
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