SRB Chair on Resolution Framework Priorities for Next EU Legislature
The SRB Chair Elke König published an article that outlines the potential resolution framework priorities for the next EU legislature, just as the mandate of the current European Commission and Parliament draws to an end. This article was published in The Eurofi Magazine.
In the article, she mentions that, from the perspective of SRB, the finalization of the Banking Package represents a milestone in strengthening the resolution framework. The partial harmonization of the creditor hierarchy was another step forward. Building on these achievements, SRB is hopeful that the next legislature will deliver on the implementation, review, and completion of the resolution framework. She then outlined the issues that legislators in the next mandate could address to the complete framework:
- Addressing asymmetries between the EU resolution regime and national insolvency frameworks
- Aligning the conditions to determine that a bank is "failing or likely to fail" with the criteria for liquidation at national level
- Addressing the issue of the requirements for burden sharing under the 2013 Banking Communication of EC, which apply in cases of precautionary recapitalization and liquidation aid, not being entirely in line with those for bail-in under the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), potentially giving wrong incentives when compared to resolution
- Fully harmonizing the ranking of creditors in insolvency, as Directive 2017/2399 focused only on unsecured debt instruments in the hierarchy, while national differences remain on the ranking of the rest of the creditors
She highlighted that deepening the Economic and Monetary Union in EU requires the completion of the Banking Union and of the Capital Markets Union. A common framework for banks’ insolvency would constitute a significant advance on both paths. Both strong Banking Union and European capital market can play an important role in the creation of the needed liquidity for capital instruments and Minimum Requirement for own funds and Eligible Liabilities (MREL). Therefore, work on these must continue to progress in the new EU legislature.
Related Link: Article by SRB Chair
Keywords: Europe, EU, Banking, BRRD, SRMR, Directive 2017/2399, MREL, Resolution Framework, Creditor Hierarchy, Banking Union, SRB
Related Articles
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
