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Building a stronger crisis framework in a financial world always in motion - Columbia University – Dominique Laboureix



Good afternoon, ladies and gentlemen, I would like first to thank Columbia for the invitation to the SRB, and to myself in particular, to speak to you today.

Today, I will share my thoughts on the initial lessons learnt after almost one year from the 2023 bank failures in the US and Switzerland, and the new risks that we may be facing.

As here in America you know more than anybody, a well- functioning financial system, balancing healthy risk-taking with the necessary prudence, enables stable growth through an efficient allocation of resources, better risk diversification and support to innovation. 

Bank prudential regulation and supervision aim at minimising the chances of liquidity and solvency crises. [From that perspective, and as stressed by Michael, the finalisation of Basel III is a key element of global prudential regulation and it should be implemented in all jurisdictions.] However, banks remain private enterprises so, even if tightly regulated and of critical importance, they should be allowed to fail. Since no systemic bank should be considered “too big to fail” (this phrase meaning governments and taxpayers were obliged to step in to avoid systemic banks to fail, in particular in 2008), when a failure happens despite all the prudential regulation and supervision, resolution authorities are there to safeguard financial stability, minimising disruptions to the real economy and shielding taxpayers from losses. 

To some extent, the fact that EU banks were not fundamentally affected by the March 2023 events confirms that the reforms put in place on capital, liquidity and loss absorbency rules after the great financial crisis - applied to any type of banks, large and small, although in a proportionate way - are an important safeguard for financial stability. However, we should not be complacent. The last crisis reminded us that a bank failure could occur swiftly and authorities should be ready to act. 

In Europe, financial stability is closely tied to a better functioning and greater integration of our internal market. By removing fragmentation, both Banking Union and Capital Markets Union, the two landmark reforms that the Commission has set out to improve integrate our financial sector, offer the potential of significant economies of scale and increased competitiveness in the financial sector. Unfortunately, the finalisation of both projects has been substantially delayed. In particular, an agreement on how to complete the Banking Union has eluded European legislators for almost a decade.

Lessons learned

Last year, we witnessed the failure of three American regional banks, whose combined assets amounted to almost $550 billion, whereas in Switzerland we saw the demise of a G-SIB, which was in the end acquired by another G-SIB. 

The authorities stabilised the situation both in the US and Switzerland and protected financial stability with unprecedented measures implying also a support coming from public bodies. While no depositors suffered losses in the US, thanks to a “systemic risk exception” which permitted an unlimited coverage, shareholders and unsecured debtholders took a serious hit, in Switzerland shareholders of Credit Suisse were severely depleted and all the outstanding amounts of Additional Tier 1 instruments were wiped out. These events have prompted a range of policy questions about the adequacy of the prudential and supervisory frameworks and the credibility of the resolution regimes. 

Both the Basel Committee and Financial Stability Board reports, published in October 2023[1], discuss some preliminary lessons from the bank failures. 

I will focus on the lessons learnt from a crisis management standpoint.

In terms of crisis management, to keep it simple, the review of the FSB concluded that, yes, the system worked but it also identified several implementation issues. 

Among the positive aspects, resolution planning and capabilities, as well as the build-up of sufficient loss absorbency capacity, proved useful and provided an “executable alternative to the solution preferred by the authorities for Credit Suisse” – a credible plan B. In addition, Credit Suisse was treated as one single entity – or in our jargon as a single point of entry – and no ringfencing along national borders was ever on the table. A major improvement with respect to the past that was brought on by the framework and by the cross-border work of all authorities involved. This feat, only ten years ago, would have been unthinkable! Finally, cross-border cooperation and crisis communication within the Crisis Management Groups (CMG) worked well and allowed for thorough contingency planning in the build-up of the crisis. Although I know that communication worked well in the CMG from my colleagues, as the SRB was not part of the CMG…!

This leads me to the implementation issues, for brevity, I underline only four of them:

  • The first one, indeed, is that we need to ensure that information sharing, international co-operation for internationally systemic banks is further enhanced, including in cases where a resolution authority is not in a Crisis Management Group (CMG), or where the CMG is not activated/non-existing. The failure of a systemic bank could cause instability even in places where the bank does not operate directly. 

  • The second one is that we need optionality for resolution strategies and tools - depending on the various scenarios, for example liquidity crises. Other strategies, transfer tools for instance, or a combination of strategies, could be more appropriate in certain situations. This, however, does not make bail-in less of a priority. Basically, we need to remain nimble, with backup options in our resolution strategies. We should be able to switch or combine tools to respond effectively to each situation. In Europe, the SRB is working intensively on the operationalisation of resolution tools and procedures, according to different scenarios, also through dry-runs involving national authorities and other EU authorities. 

  • The third one refers to the need to work further on the operationalisation of the bail-in tool in a cross-border context, where loss absorbing instruments are held by non-domestic investors. In such a case, compliance with applicable securities laws, such as the US one in the case of Credit Suisse, requires detailed preparation including potential disclosure of pro-forma financial statements to the market in the event of resolution. It is crucial that the main countries facilitate the recognition of resolution actions exercised by foreign authorities in other jurisdictions. In this regard, the SRB is working with its partners in the FSB working group on cross border crisis management.

  • The fourth one is the importance of liquidity in a crisis. Unsurprisingly, liquidity proved once more to be vital to restore stability. With financial stability in mind, both the Swiss and the American authorities moved swiftly and decisively to provide liquidity. 


This last area of improvement deserves a more in-depth look. [As Michael mentioned before,] here in the US, and at a global level, there is an interesting debate on how to deal with liquidity stress in a crisis. 

I can only agree with the argument that banks should have a diversified range of liquidity options that they are able to access in a variety of conditions; discount window borrowing to central bank could be an important part of such options. It is a pity that banks have an option such as the discount window and pass on it because of stigma considerations. They definitely need to prepare themselves with an appropriate legal documentation; I also believe that the suggestions on an increased prepositioning of assets could indeed be of help to reduce liquidity stress. 

We should really work together, in a coordinated way, to test banks’ readiness and capacity to pledge assets in a crisis, including for instance to tap the discount window. By creating a supervisory expectation and making it more of a routine exercise, we would hopefully help remove the stigma from this kind of operations. 

I am less convinced that introducing other liquidity ratios, such a shorter term LCR, is a priority at the moment. In fact, in a world where outflows can be very sudden - SVB lost 25% of its uninsured deposits that is 42 bn dollars in a single day - even the 5 days working week may seem a long time-horizon. 

Also in the EU, the SRB has been working intensively with the banks to improve their ability to identify and mobilise collateral in case of need. 

In practice, the SRB has developed three principles that banks should comply with, in order to enhance the liquidity and collateral framework in resolution. First, banks should be able to estimate the liquidity and funding needed for the implementation of the resolution strategy and possible liquidity sources in the planning phase (in “peace time”). Second, banks should be able to measure and report their liquidity and funding needs and means when in resolution (in “war time”). And finally, banks should be able to identify and mobilise assets that can be used as collateral to obtain funding during and after resolution. Mobilisation of a large part of banks’ assets is of particular relevance in resolution and is therefore the main focus of the SRB work with the banks.

Even if banks are very well prepared, we cannot rule out that their liquidity will not be enough in time of crisis. In times of need, our Single Resolution Fund (SRF) stands ready to provide liquidity. The SRF has now reached nearly 80 billion euro (87 billion dollars), and its firepower will almost double if the revised ESM Treaty is ratified. Yet, the liquidity needs of a global bank may go even beyond the SRF means. We stand ready to find a solution for these extreme cases. In this vein, given how critical liquidity is in a crisis also beyond the means of the bank, the SRB is also contributing to the FSB working group on the design features of public liquidity backstop mechanisms.

Vision 2028

Banks, and thus supervisory and resolution authorities, face ever changing risks - cyber risk, compliance and reputational risks and, as we have seen, faster bank runs. More generally, the level of uncertainty is growing year after year. 

In the last months, the SRB has launched a strategic review to set the priority for the next five years. The aim is to ensure that the SRB becomes even more efficient and effective in its work. Our new strategy, Vision 2028, will better-equip Europe to deal with the various challenges, to ensure banks can be resolved so as to protect financial stability at no cost to the taxpayer.

On the resolution planning work, the SRB is shifting from a phase of resolvability capacity building - ours and the banks’ - to a new phase where testing and operationalising all these capabilities will be our new focus. 

The new strategy aims at improving our crisis readiness for all kind of risks, including for instance those stemming from digitalisation. 


Of course, our focus for the past years has been on the risks stemming from the banking sector but we should not forget the risks coming from less regulated sectors of financial markets such as NBFIs.

There are, in fact, relevant interconnections between banks and NBFIs in Europe.

According to the European Central Bank], the NBFI sector is an important source of funding for euro area banks but it is also a relevant counterparty on their asset side. For instance, NBFIs play a major role as providers of repo funding to banks. In the last quarter of 2022, almost half of all repo funding to banks came from these entities. This NBFI funding is also highly concentrated in a handful of banks. These deposits and repos constitute the liquidity buffers of the NBFIs and could be withdrawn very quickly in case of need.  

Also, recent history has shown that there can be relevant spillovers between banks and NBFIs. Let’s not forget that the default of Archegos on its margin calls from several global investment banks was one of the main blows that eventually sunk Credit Suisse. 

The FSB, in 2020, laid out a comprehensive and ambitious work programme for strengthening the resilience of the NBFI sector while preserving its benefits and it is currently delivering on it. A very central part of this effort rotates around liquidity. In fact, the stability and robustness of the non-bank financial institution network rely on the accessibility of liquidity and its efficient facilitation during challenging market scenarios. 

In the EU, we have a regulatory framework for recovery and resolution of CCPs in place and the work on resolution planning for these entities is already ongoing. In addition, the EU is currently finalising its crisis management and resolution framework for insurances. In addition, in a recently published report, the European Commission suggested to assess the merits of a more consistent and coordinated macroprudential framework for NBFIs.

We are very supportive of all these initiatives. However, I would look even beyond them and wonder: hasn’t the time come to start exploring a crisis management framework for more NBFIs? 

The perimeter of resolution has been expanded in recent years to insurance corporations and CCPs, but there are still large chunks of the NBFI sector which fall outside of it and some of the biggest NBFIs are so large and so interconnected (while a number of them are providing for bank like activities) that they have certainly become… “too big to fail”.

Perhaps, now it is time to start moving further and investigating the opportunity to develop a crisis management framework for more NBFIs as was done for banks, insurances and CCPs to protect financial stability.  


I have briefly illustrated some of the preliminary lessons learnt from the banking failures and the on-going works at global and EU level to build on these lessons learnt and on the upcoming new risks. 

What I like of our line of work, resolution and crisis management at large, is that in one hand it is extremely concrete and practical, but at the same time forces us to look far-away in future and plan for new, at times seemingly remote, risks. 

As we have been reminded by the recent crises, in order to deliver on our mandates, we have to keep cooperating as much as possible among authorities and with the banks both at local and international level.

We should also always reflect on what is missing in our frameworks and work together to improve them. 

This is why, on both sides of the Atlantic, it would be wise for our political masters to nurture our frameworks so that they are always fit-for-purpose for the new risks that our systems will be facing. The Basel III package, the Banking and Capital Markets Unions packages are good examples of reforms that have been pending for a long time and that would improve our financial systems. 

We know already many of the reforms needed. Let’s just do them!

Thank you for your attention.


[1] FSB (2023), 2023 Bank Failures: Preliminary lessons learnt for resolution, October; Basel Committee on Banking Supervision (2023), Report on the 2023 banking turmoil, October. [The FSB Report was steered by S. Laviola, in his capacity as chair of the bank cross-border crisis management working group.]

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