Skip to main content

Crisis management makes the Banking Union more competitive - Keynote speech by SRB Chair Dominique Laboureix

Speeches
|

BaFin Resolution Planning Conference

Frankfurt, 4 February 2025 

[CHECK AGAINST DELIVERY]

Ladies and gentlemen, first, let me thank Birgit for this introduction and for inviting me to speak here to you. I would also like to thank all the colleagues at BaFin that have contributed to organising this event. 

I am delighted to be here today, speaking before an audience that represents the very heart of Germany’s financial landscape. It is truly inspiring to see representatives from the diverse array of banks that together form the backbone of Germany’s diverse banking sector. 

Birgit mentioned “our tenth birthday”. Let me tell you. They have been momentous years. We should not forget that we started entirely from scratch. The Banking Union was brand new. Same applies to the resolution’s principles and rules. All brand-new concepts. 

However, for as much as I am tempted to look backwards at the challenges met by the Single Resolution Mechanism and its successes, I believe it is better to plan ahead – think and discuss about the future. 

At the 10-year mark, it is really time to think “what’s next?”

This is why I would like to take advantage of your attention to tell you a bit about how the SRB and the SRM are implementing our new strategy - Vision 2028 - and how this evolution contributes to more financial stability with more focussed work for authorities and banks alike.

I would also like to touch upon how the regulatory backdrop is changing and why we think that a strong European crisis toolkit is, really, in everybody’s best interest. 

  1. Vision 2028 will lead to more inclusive, transparent and simple resolution planning work

Together with NRAs, we have been implementing, for a little less than one year, our new strategy whose aim is to make our work more inclusive, transparent and focussed for us, the NRAs and the banks. 

Let me give you some examples of the work we are doing, together with BaFin and the other NRAs. I will mention 6 areas:

1.1 Transparency

We foster transparency by publishing consultation documents well in advance, allowing banks more time to react and engage in discussions before consultations close. Last November, we also published the list of our requests to the banks for the whole 2025.

We also organised our first public hearing on a new policy (resolvability assessment), which was well attended by industry and others. We want to hear your voice. Loud and clear.

This approach – I like to think – allows banks to help us improve our policy making while ensuring a strong and up-to-date resolution planning guidance. 

1.2 Targeted plans

In addition, we are streamlining the resolution planning process and the resolution plans to make them more efficient and better focused on the most important issues. The new streamlined resolution plan is ready to be used for the 2025 cycle. 

A shorter, more targeted plan will allow us to allocate more resources to the most important topics using a risk-based approach. As such, we (and the banks) can better focus on long-term projects, such as operationalising transfer tools and enhancing optionality in resolution - key areas for improvement after the 2023 turmoil.

1.3 Targeted requests and testing

We want to be more concrete also on what banks need to do. Our requests are to be actionable. No more abstract "expectations", only clearly defined "capabilities." 

To make sure that our requests are even more tailored than before, the SRM is pivoting towards more “testing” of banks’ work. In the past years, we have asked banks to build different capabilities. Now, we want to go “door-to-door” and check what is still missing for that specific bank to become more resolvable. 

This is why we will organise more self-testing, but also deep-dives and on-site inspections. I know that especially on-site inspections can be costly and time-consuming. Let me reassure you that our exercises will be very targeted. Of course, we will coordinate with our colleagues on the supervisory side to avoid overlaps. 

1.4 More stable policy than in the past 

This feels like a lot of change. However, it will not be traumatic. We are working to ensure a more stable and predictable resolution framework and planning cycle. 

Our latest MREL policy, for instance, can be considered as stabilised. Let me add a disclaimer here. It will remain stable “all other things equal”. Should new risks emerge, new rules be approved by our policy makers, or new combination of tools approach be developed by the resolution authorities, we would certainly have to revisit our MREL policy.

Since we reached a certain level of maturity, we see no need for major policy shifts from one year to another. “Evolution”, as opposed to “revolution”, is the keyword here!

1.5 Proportionality

I understand that in the audience we have many representatives of smaller and mid-sized lenders. I would like to tell you “We know very well that resolution planning can be tough and intense work.” 

This is particularly true for smaller banks. 

This is why we take proportionality very seriously in the definition of our preferred strategy. Of the ca. 2000 banks and banking groups active in the Banking Union, less than 200 are earmarked for resolution and, as a consequence, asked to enhance their resolvability.

1.6 SRM Culture and cooperation

I want to echo Birgit’s on the importance of trust. It is critical that the authorities of the Banking Union cooperate well, trusting each other, so that everyone can trust the Banking Union.

Thanks to the SRM Vision 2028, we are taking our cooperation to the next level.

NRAs are becoming even more involved in our governance and in our policy-making. For instance, NRAs are now involved since the beginning in the drafting of our policies. 

We are also working very hard on staff-swaps and other HR initiatives to ensure that we have a truly common culture within the SRM. 

Ideally, in the eyes of our stakeholders, the Single Resolution Mechanism should work as one. 

I have repeated this concept many times. I think that citizens, banks, policy makers will trust the SRM only if it works as one. In a continuum with our colleagues on the supervisory side. 

           2. A shifting regulatory environment

Vision 2028’s drive towards a more targeted resolution planning and more operationalisation is not happening in a vacuum.

 I well noted that, starting from the debate on competitiveness, we see more and more references to “simplification” these days.

Our work to simplify the resolution planning process goes exactly in this direction. 

At the SRB, we want to make our work and your efforts more efficient. We want more “bang”, in term of financial stability, for each “buck” spent on resolution planning. For the banks and for us.  This, at the end of the day, is what simplification is all about. 

However, simplification in our practices or reporting requirements should not mean de-regulation. This is particularly true for the crisis management side.

Resolution needs to remain a credible option to ensure financial stability. This can only happen if banks have the right capabilities in place, with an adequate buffer of loss-absorbing liabilities and robust management information systems that allow them to produce at short notice the information and data required for a bail-in or a valuation, key ingredients to a successful resolution. 

In fact, a strong crisis management framework is critical for the credibility and the resilience of the banking sector. 

The whole point of the resolution framework is to ensure that a bank can fail - like any other business would - without wrecking a country’s economy and saddling generation of taxpayers with unsustainable debt. 

In this context, it is all the more important to ensure that incentives for shareholders and bondholders are set right. And, in case things go wrong, that banks and authorities are well equipped to deal with the fallout. 

This is what resolution planning is all about. Maintaining financial stability, avoid bailouts. If I may, there is no alternative and this is especially vital seeing the limited fiscal capacity of a number of Member States throughout the EU.

If you think about it, a well-equipped crisis management framework can be the foundation of a more dynamic, albeit resilient, banking sector. 

          3. CMDI: a step toward a better crisis management framework

The reform of the crisis management and deposit insurance framework – CMDI – is supposed to go exactly in that direction. A step toward a better crisis management toolkit. 

I don’t want to spend a lot of time on this topic as I am sure that the panel later today, with my fellow Board Member Karen Braun-Munzinger, will delve into the specifics of the reform and of the debate.

But let me tell you this. This is a very tough negotiation, but - in reality - it should not be. 

As I mentioned before, it is really in everybody’s best interest to have a better resolution tool box in place. 

Resolution - if adequately prepared - works better than liquidation. 

In resolution, depositors feel safer knowing that they will have continuous access to their savings.  No matter what. This is not true in liquidation.

In resolution, taxpayers know that their money will not be used to bail banks out. No matter what. Whereas, this can happen in liquidation.

German banks have been very vocal on their scepticism for this reform. I think this is a great occasion, here in Frankfurt, to dispel some of the understandable fears and doubts I heard in the last months. 

3.1 Scope 

I hear often that CMDI will bring an indiscriminate expansion of the scope of resolution. This is simply not true. For the banks in the SRB remit, we would expect minimum changes as most of our banks are already earmarked for resolution. 

NRAs, BaFin in Germany, would then need to see how many more banks it would like to earmark for resolution. According to our study these would be a limited number in the Banking Union.

Also, seeing the amendments that Council and Parliament are negotiating, IPS banks do not seem meaningfully affected by the reform. 

3.2 Moral hazard 

Another common concern is that, once CMDI becomes law, then small banks earmarked for resolution will be allowed to avoid having an adequate MREL capacity. CMDI, according to those concerned, would generate a moral hazard problem.

All the contrary, CMDI does not substantially change MREL requirements. And, the “DGS bridge” can only be activated after MREL has been depleted. 

No “free lunch” here.

Actually, more banks earmarked for resolution means more MREL capacity overall. 

3.3 Depletion of DGS and SRF

Also, I do not expect CMDI to have a relevant impact on DGS or SRF finance. As MREL remains the first line of defence and the DGS Bridge could be used only to facilitate the sale of small banks instead of depositors’ money. So, the absolute figures are negligible. 

3.4 EDIS and CMDI

Finally, let me clarify: CMDI is not related to EDIS.

Don’t get me wrong, I fully support completing the Banking Union. However, if there are concerns about DGS mutualisation through CMDI, let me reassure you—this reform contains no such proposal.

3.5 Council conditions

Driven by some of these fears, Council attached numerous conditions to the use of the innovative tools that the Commission initially proposed. It’s time to move past these fears and trust us, along with the NRAs, to implement our framework effectively. The only way to build a useful and efficient resolution toolkit is to trust the framework and give the authorities the flexibility to implement this framework properly. 

Short of that, we risk rendering all this work meaningless if we cannot use our tools when we need them.

         4. Conclusions

Let me conclude. 

Financial stability is the bedrock of a healthy, dynamic and competitive economy. 

In the last years, European banks have been performing very well. Clearly, a better macroeconomic environment has been critical for this success. 

Also, in 2023, European banks have been largely spared by the banking turmoil engulfing the US, Switzerland and the UK. 

This, ladies and gentlemen, is the result of the resilience that the Banking Union has built into the banking system. This is an accomplishment of the last 10 years. 

Our work that I described before will help ensure the same result, when the next crisis comes.

In the darkest times, the resiliency that resolution planning work builds in the banks, protects depositors, taxpayers and bottom lines alike. Bankers should not forget this when speaking with their policy makers.

In this vein, a complete crisis management toolkit is a key competitive advantage for Europe and more particularly the Banking Union. 

Resolution planning work enables banks to grow, innovate and, yes, possibly fail without endangering the growth that has been achieved in the years before.

My hope is that the SRM work for the next years will help to make the Banking Union even more resilient, hence promoting its long-term competitiveness. 

Policy makers, in turn, should be reminded how giving us the right tools will help them deliver their long-term growth objectives.

Thank you for your attention.

Contact our communications team

Head of Communications & Spokesperson
Name
Susan Carroll
Email
Susan.Carroll [a] srb.europa.eu
Phone:
+ 32 2 490 3439
Mobile:
+32 470 96 48 01
Speechwriter & Communications Expert
Name
Seán De Búrca
Email
Sean.de-Burca [a] srb.europa.eu
Phone:
+32 2 490 3710
Mobile:
+32 477 02 87 10
Senior Communications Expert
Name
Camille De Rede
Email
Camille.de-Rede [a] srb.europa.eu
Phone:
+32 2 490 3530
Mobile:
+32 477 028 530

Recent speeches

Dec 4 2024
Speeches
In his speech to ECON on 4 December 2024, Dominique Laboureix discusses the 2025 Work Program, focusing on improving bank resolution readiness through testing and streamlined processes. He highlights concerns over the CMDI review, warning against added complexity that risks bail-outs and fragmentation, calls for simplification to ensure the framework remains effective.

Related news and press releases

Speech
Speeches
|
In his speech to ECON on 4 December 2024, Dominique Laboureix discusses the 2025 Work Program, focusing on improving bank resolution readiness through...