The SRB Chair Elke König published an article setting out work priorities for 2021. SRB will continue to focus on building the resolvability of all banks under its remit, as set out in the multi-annual program for 2021-23. In addition to building resolvability, SRB will continue to work with its European partners on completing the Banking Union, including finding an institutional solution for liquidity in resolution, making progress toward a common deposit guarantee system, and working on a European framework for bank insolvency. International cooperation is another cornerstone of the SRB work, with SRB recently having published a cooperation arrangement confirming its commitment to continue cooperation with BoE. Overall, SRB aims to play a role in ensuring a more resilient banking sector that can help build the recovery and financial stability in Europe and beyond.
In dealing with the challenges posed by pandemic, the SRB approach has been to support banks with operational and financial relief measures, using flexibility in the resolution framework and by continuing to focus on ensuring banks resolvability. If a bank does fail, it means that this can be managed in an orderly way, without disrupting the economy or putting viable banks in danger. One reassuring news is that the banks provided all the required information, with only minor delays, and stayed on track to deliver in line with the SRB "Expectations for Banks" highlighted Ms. König. With a focus on building bank resolvability, the following are the four key priorities, or resolutions, for the year ahead:
- Enhancing resolvability. SRB began the year by publishing its key policies, including the Expectations for Banks, as well as adapting these policies to the changes brought about by the new Banking Package. These policies provide banks with a clear guidance and a phased timeline for becoming fully resolvable. Banks are expected to have built up their capabilities on all aspects by the end of 2023, except where indicated otherwise. Where needed and on a bilateral basis, SRB may agree alternative phase-in dates with individual banks. The Expectations are tailored to each individual bank and its resolution strategy, allowing for flexibility and proportionality. SRB called on banks to do the work needed to achieve resolvability.
- Ensuring ready-to-use resolution tools. Resolution plans are in place for all SRB banks, with the focus now on operationalizing these plans. Most SRB banks have resolution strategies that use bail-in alone or in combination with other tools. SRB will work on deepening banks’ bail-in playbooks, following the publication of a detailed operational guidance on this topic. SRB will also work to detail the plans for banks that use other resolution tools, such as transfer strategies.
- Building up minimum requirement for own funds and eligible liabilities (MREL). Momentum on building up MREL needs to be maintained. Banks know their MREL targets and SRB urges them to establish realistic funding plans that do not put off until tomorrow what should be done today.
- Growing the Single Resolution Fund. SRB will also continue to build up the Single Resolution Fund until 2023, when it is expected to be fully funded. SRB is on target for this goal. Late last year, the Eurogroup agreed to implement the backstop to the Single Resolution Fund stepwise in 2022, two years earlier than originally planned. This decision acknowledges that SRB has achieved risk-reduction in the Banking Union and it effectively doubles the amount of firepower of the fund.
Related Link: Update from SRB Chair
Keywords: Europe, EU, Banking, Resolution Planning, MREL, Banking Union, Work Priorities, Resolution Framework, SRF Backstop, Liquidity in Resolution, SRB
Previous ArticleFDIC Selects Companies to Compete in Final Phase of Tech Sprint
PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA).
ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022.
OSFI decided to increase the Domestic Stability Buffer from 1.00% to 2.50% of total risk-weighted assets, with effect from October 31, 2021.
HKMA is requesting banks to participate in a tech baseline assessment, which forms part of the HKMA Fintech 2025 strategy.
OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada.
The NGFS Study Group on Biodiversity and Financial Stability published a Vision paper exploring the case for action in addressing the financial stability concerns arising from biodiversity loss.
ACPR published the final version of CREDITIMMO 2.3.0 taxonomy for the decree of October 31, 2021.
EC, has approved, under the EU State Aid rules, the fourth prolongation of the Italian guarantee scheme to facilitate the securitization of non-performing loans.
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.