SRB Announces Single Resolution Fund on Way to Reach Target
SRB announced that the Single Resolution Fund received an increase of EUR 9 billion from 3,066 institutions for 2020, bringing the total amount in the Fund to approximately EUR 42 billion. The target size of the Single Resolution Fund has been set at 1% of covered deposits by the end of 2023. The Fund will end up at close to EUR 70 billion, taking into account the current annual growth in covered deposits. According to the SRB Chair Elke König, the Fund is being "steadily built up" and is on its way to reach the target.
The Single Resolution Fund was established by the Single Resolution Mechanism Regulation (Regulation 806/2014 or SRM Regulation). Where necessary, the Fund may be used to ensure the efficient application of resolution tools and the exercise of the resolution powers conferred to the SRB by the SRM Regulation. The Single Resolution Fund has grown to EUR 42 billion after the latest round of transfers and can be used to support the effective resolution of a failing bank, if needed. However, the Fund shall not be used to absorb the losses of an institution or to recapitalize an institution. The Fund is composed of contributions from credit institutions and certain investment firms in the 19 participating member states within the Banking Union. These contributions are calculated according to EU law and collected via the national resolution authorities.
Within the resolution scheme, the Single Resolution Fund may be used only to the extent necessary to ensure the effective application of the resolution tools, as last resort, in particular:
- To guarantee the assets or the liabilities of the institution under resolution
- To make loans to or to purchase assets of the institution under resolution
- To make contributions to a bridge institution and an asset management vehicle
- To make a contribution to the institution under resolution in lieu of the write-down or conversion of liabilities of certain creditors under specific conditions
- To pay compensation to shareholders or creditors who incurred greater losses than under normal insolvency proceedings
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Keywords: Europe, EU, Banking, Single Resolution Fund, Resolution Framework, SRMR, Banking Union, SRB
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