The EC Vice President Valdis Dombrovskis and the SRB Chair Elke König spoke at the 2018 Single Resolution Board Conference in Brussels. EC Vice President focused on the status and the future of the bank crisis management framework in EU and discussed three of the most important lessons for the financial sector during the global financial crisis. Additionally, SRB Chair, during the Welcome Speech, outlined the work priorities of SRB in the coming year.
EC Vice President took stock of where Europe stands on the following lessons learned from the crisis:
- The first lesson is about being well-prepared for major bank failures, no matter how improbable they may seem.
- The second is about setting aside in advance the financial means necessary to face a systemic crisis.
- The third is to beware of complacency or overconfidence—even in a growing economy.
SRB Chair emphasized that resolution planning is a long-term project and "it is clear that we are in a better place today than we were five years ago, but there is no clear-cut answer" on whether banks are resolvable now. In 2019, SRB will carry on the work to strengthen resolution plans and all SRB banking groups will be covered by a resolution plan in 2019. SRB will increasingly focus on tailoring resolution strategies to a bank’s structure and business model and identifying and addressing impediments to resolvability. A key tool to achieve resolvability is, and will continue to be, Minimum Requirement for Own Funds and Eligible Liabilities (MREL). 2019 will see sizable progress in the definition of MREL requirements, including the location of MREL. This year, SRB will continue to determine MREL targets at the consolidated level and will set individual targets. SRB will also continue the work on identifying impediments and developing solutions together with the industry and with the national resolution authorities.
Ms. König informed that the Single Resolution Fund, or SRF, will continue to grow (to just short of 33 billion) in 2019 and the amounts will be invested to ensure value protection and high liquidity. The SRB is also confident and hopeful that progress can be made on the important third pillar of a harmonized deposit guarantee scheme (EDIS) to complete the Banking Union. The harmonization of insolvency regimes remains essential, as the Single Resolution Mechanism framework for resolution is faced with 19 or more different insolvency procedures in the Banking Union. She added that Brexit will see all bond issuances under UK law move to third-country issuances. Only if there are adequate contractual clauses will these instruments be MREL-eligible in the future. Moreover, the post-resolution work in the Banco Popular case is ongoing. In August, SRB had launched the first phase of the "right to be hear"’ procedure. Phase 2—in which eligible parties can provide their comments—will open on November 6 and will run for a period of three weeks. Further information on the second phase will be available on the SRB website.
Keywords: Europe, EU, Banking, Resolution Planning, MREL, EDIS, SRM, EC, SRB
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