Elke König of SRB Speaks About Harmonizing Insolvency Regimes in EU
The SRB Chair Dr Elke König delivered a keynote speech in Stockholm on the issue of banking resolution. She highlighted that, since the financial crisis, EU has put in place a number of measures and institutions to better deal with any shocks to the system going forward. However, there are many items still to be completed and dealt with.
She stressed that minimum requirement for own funds and eligible liabilities (MREL) buffers should be built in good times to avoid cyclical behavior; "if we do not adhere to this then the regulatory framework may end up being cyclical. And the same applies for other measures needed to address obstacles to resolvability. " While much progress has been made to date, work still remains to complete the Banking Union, including on issues such as the European Deposit Insurance Scheme and the backstop for the Single Resolution Fund.
The SRB Chair said, "this is the right time to continue to push for completion of the Banking Union... ." Insolvency procedures in the EU are still very much national. Bank insolvency procedures are not equally structured in all EU member states and should be elevated to a common best standard and practice. The ideal solution would be EU-wide rules on insolvency proceedings for the banking sector. However, the development of national handbooks is a very good "second best" option—for now at least. At present, there are 19 insolvency regimes in the Banking Union alone. This makes analyzing the insolvency counterfactual for a cross-border bank in resolution highly challenging and results in diverging outcomes, depending on the home country of the institution. Dr König encouraged all stakeholders to drive these pressing issues forward, given the favorable economic conditions that prevail at present.
Finally, the SRB Chair stressed the need for continued close cooperation within the euro area, with the Nordic countries, and on the international stage with partners such as the United Kingdom and the United States, to ensure continued success in maintaining financial stability.
Related Link: Speech (PDF)
Keywords: Europe, EU, Banking, Resolution Regime, Banking Union, SRF Backstop, Supervisory Cooperation, SRB
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.