[Check against delivery]
Thank you, Melinda, and good afternoon, ladies and gentlemen.
It is my honour and pleasure to once more give the closing remarks to the SRB Annual Conference.
What a joy it was to organise this hybrid event in our own house – here in our Brussels headquarters. And to be able to welcome more speakers in person this year, which is a good sign that we are coming back to a more normal way of life.
This also puts me in mind of an idea that I think has permeated the discussions today at our conference, which is the idea of moving forward.
Although we cannot say that the pandemic situation is fully under control, the progress made in vaccination seems to feed hope for advancing on what has to be done, even when discussing the often challenging topics in the panels.
This idea of moving forward is one that, in our case, revolves around three core ideas.
The first idea that helps to build the case for moving forward, is that we will focus on the implementation of bank resolution. Resolution is not only about planning, resolution is also about implementing – the delivery that the Chair emphasised when opening the event today.
Implementation is what is expected from us. Our plans must be able to be executed, at short notice and in the heat of a bank failing. Our plans must be doable. This is one of the key features of our mission.
This was a point discussed in the first panel today, which looked at the resolution framework, and a number of the panellists were very vocal about it. Of course we have to keep delivering on building resolvability ahead of the key milestone of 2023. But getting implementation right underpins such an endeavour in a two-fold way: banks must deliver on the firm expectations we have communicated so as to become resolvable; and the SRB, together with the NRAs, has to make sure, notably through operational documentation, dry-runs and deep-dive exercises, that the plans are implementable.
The second core idea of moving forward boils to our dominant model for implementing resolution, the Single Point of Entry (SPE). This resolution strategy seeks to address the home-host issue in the Banking Union.
We know that creditors and shareholders will have to bear losses. A bank resolution is not a fairy tale that ends happily ever after. Creditors and shareholders will have to bear losses, because otherwise it is the ordinary citizen who has to pay, and this is precisely what our resolution framework is set up to avoid.
But we should also be mindful that, when we are implementing resolution under an SPE model, we should not discriminate among subsidiaries, no matter where they are located. We should treat resolution from a group perspective and target the exercise of the resolution powers at parent level.
As emphatically stressed by our Chair in a recent blog post on the matter, “the key issue is to ensure the subsidiary is not ‘abandoned’, even in cases where the parent itself is ailing”. Ensuring the means to achieve this desideratum remains the key challenge for the implementation of the SPE model. A few questions may illustrate well where we should be looking to: Is the quest for effective and enforceable contractual arrangements possible in all legal orders? Does the alternative of so-called branchification, premised on the idea of a single legal entity with a single balance-sheet, cater adequately for the ensuing risks stemming for the ‘home’ Deposit Guarantee Scheme, in the absence of the European Deposit Insurance Scheme? Or should we consider that the SRB, as the single European resolution authority, has been vested with resolution powers of such extent to precisely prevent that the keys are handed over to the hosts?
Guaranteeing the sound implementation of SPE might be the best way to unlock excessive prepositioning of resources at subsidiary level, and thus live up to the foundation of a true Banking Union in Europe. I think the second panel touched on these questions very well.
So we come away from this conference with a lot of food for thought about implementing the SPE strategy.
Talking about delivering and closing gaps brings me to the third core idea – which is the joint regulatory effort that we have still to make to deliver on the completion of the European banking regulation according to international financial standards, as we emerge from the pandemic.
This stands clearly at the heart of the discussions in Panel 3, and particularly in relation to finalising the implementation of the Basel III post-crisis reforms, which will further strengthen our framework. Whilst we have to recognise that the Covid-19 pandemic created the need for exceptional measures, these reforms remain critically important for addressing shortcomings in the existing framework
And one thing that I want to stress here before this audience and the ones that are watching remotely. The SRB is fully aligned with this joint regulatory effort – together with the ECB, supervisors, the EBA and other partners, we share the impetus to move forward on the implementation of the outstanding Basel III reforms, and in particular how banks risk-weight their assets. Increasing the effectiveness of bank specific supervisory capital is key for the SRB to determine adequate levels of MREL, which is as a cornerstone of resolvability.
With this, allow me to come to a close. Today’s discussions put me in mind of something that is usually attributed to Johann Wolfgang Goethe. It is that “The greatest thing in this world is not so much where we stand as in what direction we are moving.”
I think it is time to finish what we started and move in a new direction, to make the hope that we have heard from our speakers today into reality. It is time to move in a direction that will help us to deliver together on our shared goal, to achieve full resolvability of banks, promote financial stability and protect the taxpayer.
Thank you and see you next year!