SRB Sketches Path to Further Ensure Bank Resolvability
In a recently published article, the SRB Board member Boštjan Jazbec discussed the progress made in ensuring bank resolvability in 2020. Introduction of a new resolution planning cycle based on a 12-month period was a major milestone in 2020 while the start of the gradual phase-in of the Expectations for Banks was the second key milestone. Additionally, in a press briefing, the SRB Chair Dr. Elke König highlighted that, in the coming years, SRB focus will continue to be on building resolvability for banks. SRB must keep up the momentum on increasing the Minimum Requirement for own funds and Eligible Liabilities (MREL), especially in light of the new rules and deadlines in the revised Bank Recovery and Resolution Directive (BRRD2), she noted.
The SRB Chair announced that the 2021 MREL policy, an expansion of the current policy, will be published in time for the new resolution planning cycle. Also, SRB will soon publish an updated framework on the "Public Interest Assessment," which is a key element for deciding whether a bank will be resolved or go into insolvency. This updated framework will complement the existing idiosyncratic assessment with a scenario reflecting systemic stress, or to put it into simple terms “a rainy day scenario.” In the next few years, SRB plans to fully operationalize the use of all resolution tools and their combined use for all banks, and not least for mid-size banks heavily reliant on deposit funding, which may find it challenging to access markets and issue debt. The SRB Chair also noted that all banks under the SRB remit have received bespoke work programs for 2021 and are expected to have built up their capabilities on all aspects of ensuring resolvability by the end of 2023. Finally, she emphasized the necessity of completing the Banking Union and of the progress toward building a harmonized deposit insurance framework and insolvency procedure for banks across all EU member states.
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Keywords: Europe, EU, Banking, Resolution Planning, MREL, Basel, Banking Union, Resolution Framework, BRRD, Regulatory Capital, SRB
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