SRB issued a bi-annual note aimed at reporting to the Eurogroup on the progress of SRB activities in the areas of resolution planning, resolvability, and minimum requirement for own funds and eligible liabilities (MREL); the latest policy developments; and the Single Resolution Fund. SRB also published a blueprint on key considerations for the review of the crisis management and deposit insurance framework in EU.
The blueprint on review of the crisis management and deposit insurance framework highlights that, in any reform of the crisis management and deposit insurance framework in EU, the completion of the Banking Union must be a priority. The European Deposit Insurance Scheme (EDIS) is indispensable to enhance financial stability, to overcome the sovereign-bank doom-loop, and to avoid financial fragmentation in the Banking Union. As long as there is no full-fledged EDIS, the originally envisaged third pillar, the Banking Union will remain incomplete and exposed to financial stability issues. The review should enshrine the hybrid model of EDIS into law, but with a time-bound transition period (for example, five years) toward full mutualization or steady state. In the interim period, SRB could use transfer tools at the Banking Union level (the combined use of Single Resolution Fund and Deposit Guarantee Scheme could be explored) to find potential acquirers, maintain the franchise value of failing banks under the SRB remit, and play a coordinating role in the application of national Deposit Guarantee Scheme alternative measures. In the steady state, SRB should act as the central authority with powers to manage all bank failures in the Banking Union, handling both EDIS and the Single Resolution Fund.
The bi-annual note on SRB progress highlights that SRB is in the concluding phase of the 2020 resolution planning cycle. Despite the challenges connected to COVID-19 outbreak, SRB kept the 2020 cycle on track and has recently started the 2021 resolution planning cycle. with respect to the minimum requirement for own funds and eligible liabilities (MREL) instruments issued in the UK, SRB will consider liabilities governed by UK law without a contractual bail-in recognition clause as eligible for MREL, if they otherwise satisfy applicable MREL criteria and were issued on or before November 15, 2018. This exemption will apply until June 28, 2025 to ensure alignment with the prudential grandfathering of the requirement to introduce contractual recognition clauses in own funds instruments (as per Article 494b CRR). Furthermore, within the existing legal framework, SRB has enhanced its approach to the Public Interest Assessment by the consideration of systemic-wide events in resolution planning, which will be applied in 2021. Going forward, SRB will work to deepen the analysis on the Public Interest Assessment dimensions related to critical functions at regional level and the protection of covered depositors; work in these areas will be completed before the 2022 resolution planning cycle. SRB is also preparing, among others things, the Backstop Facility Agreement, the Parallel Facility Agreement, and the termination of the Loan Facility Agreements.
- Press Release on Progress on SRB Activities
- Progress on SRB Activities (PDF)
- Press Release on Framework
- Key Considerations on Review (PDF)
Keywords: Europe, EU, Banking, Single Resolution Fund, SRF, Resolution Planning, MREL, Crisis Management Framework, Deposit Insurance, Resolution Framework, EDIS, SRB
Previous ArticleHKMA Expects Banks to Assess Need for Secure Tertiary Data Backup
Next ArticleFCA Moves Firms to New Data Collection Platform
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.
HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.
EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).
BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.
FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.
EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.
The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.