1. Introduction
Ladies and gentlemen, welcome to our SRM conference.
This is a very special one as we mark our first decade protecting financial stability in Europe [and anywhere really].
This 10th Anniversary conference will be an occasion to recall the achievements so far, but, more importantly, to discuss the way forward.
2. Achievements
Let me start from the achievements.
Resolution, I mean its framework and the second pillar of the Banking Union, started from scratch. A series of theoretical elements built on the ashes of one of the worse financial crises ever.
Nobody knew if a resolution could work.
In addition, in Europe we had to prove the value of a centralised authority in a network of national authorities.
There were many doubters. But, I think, we proved them wrong.
Together with the NRAs, we made the European resolution framework an effective reality - credible at home and abroad. We showed that it works!
How did we do that?
Most obviously, resolving the banks that needed it.
Banco Popular, Sberbank are our landmark successes. Two only? Fortunately, large banks crises are rare enough. But, in those rare occasions, we were not allowed to make any mistakes.
Resolution, in fact, is a single-shot gun. If we fail, trust vanishes and financial stability is in jeopardy.
Also, no matter what we do in a crisis, litigation will follow.
In fact, the development of case law has been critical in establishing the credibility of our framework.
With each case, and each round of judicial review, we gain greater clarity – and that clarity helps us navigate the next crisis better.
This said, successful resolutions are not our only contribution to financial stability in Europe.
Beyond these landmark cases, there is daily work on real-time crises that often goes unnoticed.
Over the years, together with the SSM and the NRAs, we have been working in on a number of crisis cases. Some eventually did not lead to a failure.
For some, we decided that resolution was not needed.
I think this too is a relevant contribution. We reserved our very extensive powers for those cases in which there was no other viable way out.
And, even more behind the scenes, resolution planning quietly strengthens the entire system every day.
Let me give you some figures that should give you the dimension of this constant resolvability progress in the last 10 years:
More than EUR 2.6 trillion of loss absorbing capacity, built by banks in the Banking Union.
EUR 80 billion of Single Resolution Fund ready to be deployed.
About 150 operational and actionable resolution plans drafted and updated every year for significant and less-significant institutions.
In addition, over the past decade, a new kind of professional has emerged in Europe: the resolution expert - today, many are in this room and on-line.
I cannot give you an exact number for Europe, but I can say this: we are many. We work in banks, consultancies, law firms, academia, and of course in public authorities. And many of us — especially the younger ones — have dedicated our entire careers to this endeavour.
Your dedication strengthens financial stability and makes Europe more resilient.
3. The road ahead
Let me now tell you about the road ahead.
I want to be clear. Regardless of our achievements, crisis management is, by its nature, a “messy” business.
Resolving banks will always be complicated, full of surprises and to a certain extent costly – but not for the taxpayers, cela va sans dire!
That’s why resolution and crisis readiness work is never ending.
The SRM will need to change too to stay ahead.
This is exactly our approach. We want to ensure that the SRM is more effective and always focused on what really matters.
This continuous improvement process is complementary to unifying the SRM working cultures and converging also with the SSM. Ideally, we should increasingly act seamlessly in a continuous process.
Continuous improvement and focus on what really matters also imply a sensitivity to simplification of course.
In that sense, we have started working on ways to remove undue burden on the industry, for instance by streamlining our resolution plans - and thus our requests - or to better coordinate with other agencies to avoid double requests.
But we can only be as effective as our framework allows us to be.
Our framework is strong, but it can be improved.
Simpler rules could help. Of course, we have to make sure this exercise does not deliver looser standards.
What I think is critical to bear in mind is that going concern and gone concern requirements are intimately linked. If a discussion needs to happen on those requirements, it has to be holistic. Of course, the SRB stands ready to be part of this debate.
Ultimately, strong crisis management capabilities should rest on a framework that is, as much as possible, simple, usable and up-to-date.
With CMDI nearly finalised, co-legislators should look ahead complete the Banking Union. One pillar, the European Deposit Insurance Scheme, is still missing from the original design.
But a complete Banking Union is more than EDIS.
With one supervisor and one resolution authority - after 10 years - I do not see many reasons to continue operating with internal barriers. But, still, banks and authorities need to deal with many discretions.
A less fragmented market is definitely the best option for a simpler regulatory environment.
Financial stability though does not begin and end with banks.
I mentioned before that we need to stay ahead of new risks that banks may face.
Now more than ever, it is important to remember that business models — and banks themselves — evolve. New players emerge, and with them, new risks.
Today, much attention is focused on the new entrants coming directly or indirectly into the banking activities.
From banks’ exposures to non-bank financial institutions to the development of the “crypto world”, it is becoming increasingly urgent to ask ourselves: has the time come to start exploring a crisis management framework for more NBFIs?
In recent years, the perimeter of resolution has expanded to include insurance corporations and central counterparties. Yet, large parts of the NBFI sector still fall outside it. Some of the biggest NBFIs are now so large and so interconnected — and many either provide bank-like functions or do business with banks — that they have already become, or are about to become, “too big to fail.”
Ideally, these debates should first take place in global fora — and the SRB stands ready to play its part in these discussions.
The cost of inaction would be significant. Sooner or later, one of these players will fail, with dire consequences for financial stability. We need to be ready for when that moment comes.
4. Conclusion
Let me conclude – as these are all topics, along with many more, that we will be discussing in detail today.
I think that, together with the NRAs [and the SSM], we have achieved much with our work of the last 10 years for financial stability, while avoiding bailouts.
We shall not rest on these good results but remain vigilant, ready to improve and always on the look-out for new risks.
This cannot be done in isolation. We should keep cooperating intensively in Europe and, crucially, with our partners around the globe.
Aristoteles famously said: “In poverty and other misfortunes of life, true friends are a sure refuge.” And bank crises are certainly misfortunes of our economic lives.
This is why I am so glad to see so many of our friends among our speakers and guests today.
Thank you for your attention.
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