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Closing speech at the SRB Annual Conference 2020 by Pedro Machado

Thursday, 08 October 2020
| Sean Pol DE BURCA

Check against delivery 


Good afternoon ladies and gentlemen,

This year’s SRB conference has seen many firsts. 

The first time we have undertaken a hybrid event, the first time our conference has packed in so much in so little time… but of course, this won’t be the first speech of 2020 to mention Covid, and it certainly won’t be the last.

Covid is ever-present, but aside from the human tragedy of the pandemic, from our financial stability standpoint, what is important is the journey from here. Where to now? To answer that, we must take a look at where we stand today.

The issue was dealt with in our first session this morning.

[Building Foundations]

In his declaration of 1950, referring to world peace, Robert Schuman said that peace could not be safeguarded nor ensured without creative efforts. Creativity in this context was seen as the achievement of a united Europe.

Well, I think after the last financial crisis over a decade ago, we could have come to a similar conclusion. We did not have enough of a ‘united Europe’, or enough creative efforts, to support the single currency and hence we had a crash. The foundations for financial stability were not strong enough.

However, after that crash over a decade ago,  creative efforts unfolded. European leaders understood that in fact we needed to create a solid European structure to support a European currency. At the time of the last crisis, we had built the house, without having strong enough foundations. And, when foundations are not strong enough, the house can be severely damaged. And damaged it was.

Thankfully, we were able strengthen those foundations. We were able to save the house. The Banking Union was created, but even still, those foundations are not yet complete. There is more to do. I’ll come back to this at the end.


For the moment, I want to focus on the positive and the realistic. The foundations have been strengthened and the house is secure. However, there is always work to do in running a home. The SRB’s job might be seen as that of a housekeeper for financial stability. We must take care of implementing the rules we have, rather than simply looking for more new ones. That being said, the SRB is a pragmatic and agile organisation, and will be ready to play its part in finding creative solutions that may be necessary to deal with the evolving crisis.

During this current pandemic, the SRB, and the financial authorities acted quickly and decisively. We have a twin-track approach – we must give banks enough flexibility to overcome current challenges, but we must also look further ahead and ensure we are prepared for the medium-term. That is why we are continuing with our work in resolution planning, open to a forward-looking approach, as became evident throughout the discussions in Session II this morning. Now more than ever, it is important that we keep our house in order and continue the work on ensuring resolvability.

Our role is to work within the legal framework that our political masters have laid out for us. Now, that is not to say that the European resolution framework is 100 per cent perfect, but I will say this: the framework we have has shown itself thus far to be flexible enough and robust enough to handle the effects of the pandemic. It is important, in uncertain economic times, that we do everything we can do ensure banks are resolvable, and that is the focus of the SRB in the months ahead.

[Foundations of individual banks]

Individual entities have to look at their business models too and identify issues and deal with them the sooner the better, because a ‘stitch in time saves nine’. We must learn from the last crisis and not try to brush problems below the carpet. It is important to deal with this up front. 

Structural weaknesses present in banks before Covid will remain after the pandemic has passed. These issues will have to be tackled head-on to avoid the spread of any rot throughout the banking sector.

Now is not the time to divert our attention from the pressing challenges that face the European banking sector, such as NPLs and asset quality, profitability or consolidation. On the contrary, these are issues that Covid makes even more pressing.

[Quick response]

Together with our partners at national level and working closely with our colleagues at the SSM and the EBA, we worked to introduce European measures in order to instil confidence. There was little time for debate, and so little time for disagreement at the start of the pandemic. Measures were needed, and measures were taken with speed. It is the unwinding of those measures - where there will be time for debate and disagreement - that will be most challenging in the coming months.


So, ladies and gentlemen, we do have firm foundations on which to promote financial stability – despite the uncertain times we are living in.

Schuman did say that Europe would not be completed all at once. He could have been talking about the Banking Union, or the Capital Markets Union! His remarks may have been 70 years ago, but they are still relevant today.

There is more to do on building Europe, and its Banking Union. We still have to build that third pillar, the common deposit scheme. We must still develop the CMU and the SRB would very much like to see progress on the backstop to the SRF. We still need for Member States to recognise that having, each of them, its own insolvency regime, without at least a modicum of harmonisation of the main tenets of banking liquidation, does not serve the purpose of a single resolution framework at EU level.

It is difficult to predict the future. But meaningful contributions were advanced in this respect in the last session that gave us some food for thought.  Let us rest on the hope of the great steps taken in the past number of years, and this will stand us in good stead for the next few years. We can indeed say that we have firm foundations for stability going forward – no matter what the coming days, months or years throw at us. 

Thank you.

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