SRB Reports on Progress in Enhancing Resolvability of Banks
The Single Resolution Board (SRB) published an update on its forward-looking approach to the 2022 priorities in terms of bank resolvability and on the operationalization of the Single Resolution Fund, including the Court rulings of recent ex-ante contributions. This note is part of SRB's bi-annual reporting to Eurogroup. SRB is also expected to publish its 2022 work program in November this year. The work program, which is naturally rooted in the SRB multi-annual program 2021-2023, will set out work priorities in the different SRB strategic areas.
The overarching priority of SRB is to make banks fully resolvable by end-2023. To achieve this, SRB had set out, in 2020, in the SRB Expectations for Banks the capabilities banks are expected to demonstrate to show they are resolvable; 2022 is a key year for the phased-in implementation of these capabilities. In the area of resolvability for SRB banks, main priorities for the 2022 Resolution Planning Cycle include:
- Liquidity and Funding in resolution. SRB will assess banks’ capabilities to identify, mobilize, and monetize assets that can be used as collateral in resolution. Banks will need to detect the sources of liquidity and collateral in resolution to address the funding needs that were identified as part of the 2021 Resolution Planning Cycle.
- Separability and Reorganization plans. Separability is a broad concept relevant to all resolution strategies. It covers several expectations which are key for both resolution planning and the bail in implementation, such as business reorganization plans (as outlined in the Expectations for Banks). To support the implementation of the Expectations for Banks on transfer tools, a separability analysis report will be requested from banks with transfer resolution strategy. SRB will also publish an operational guidance to assist banks in meeting this working priority.
- Management information system capabilities. Banks will be requested to further demonstrate management information system capabilities to produce the datasets for bail-in execution and for valuation.
These priorities are complemented by bank-specific priorities, as defined by the respective Internal Resolution Teams, both being communicated to banks through “priority letters” at the end of September 2021. Closer to the end of the implementation of the phase-in period of the Expectations for Banks, SRB expects to publish an anonymized version of a heatmap that will show, in a consistent way, whether banks have made sufficient progress in the areas that are most critical for the successful execution of their resolution strategy. The heatmap will support the assessment of how material the impediments to resolvability are, and the consideration of appropriate corrective action, either with close monitoring by the SRB’s Internal Resolution Teams in the following twelve-month period, or by starting the formal procedure for addressing substantive impediments to resolvability. Additionally, SRB is finalizing the operationalization of its collateral policy for the purposes of liquidity support if the common backstop is used (and the economic and legal considerations around it).
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Keywords: Europe, EU, Banking, MREL, Single Resolution Fund, Basel, Regulatory Capital, Work Priorities, Resolution Planning, Expectation for Banks, SRB
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