The SRB Chair Dr Elke König delivered a keynote speech in Stockholm on the issue of banking resolution. She highlighted that, since the financial crisis, EU has put in place a number of measures and institutions to better deal with any shocks to the system going forward. However, there are many items still to be completed and dealt with.
She stressed that minimum requirement for own funds and eligible liabilities (MREL) buffers should be built in good times to avoid cyclical behavior; "if we do not adhere to this then the regulatory framework may end up being cyclical. And the same applies for other measures needed to address obstacles to resolvability. " While much progress has been made to date, work still remains to complete the Banking Union, including on issues such as the European Deposit Insurance Scheme and the backstop for the Single Resolution Fund.
The SRB Chair said, "this is the right time to continue to push for completion of the Banking Union... ." Insolvency procedures in the EU are still very much national. Bank insolvency procedures are not equally structured in all EU member states and should be elevated to a common best standard and practice. The ideal solution would be EU-wide rules on insolvency proceedings for the banking sector. However, the development of national handbooks is a very good "second best" option—for now at least. At present, there are 19 insolvency regimes in the Banking Union alone. This makes analyzing the insolvency counterfactual for a cross-border bank in resolution highly challenging and results in diverging outcomes, depending on the home country of the institution. Dr König encouraged all stakeholders to drive these pressing issues forward, given the favorable economic conditions that prevail at present.
Finally, the SRB Chair stressed the need for continued close cooperation within the euro area, with the Nordic countries, and on the international stage with partners such as the United Kingdom and the United States, to ensure continued success in maintaining financial stability.
Related Link: Speech (PDF)
Keywords: Europe, EU, Banking, Resolution Regime, Banking Union, SRF Backstop, Supervisory Cooperation, SRB
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.