Crisis preparedness work and the right framework to be ready for crises

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1. Introduction

Good afternoon, Madam Chair, Honourable Members, ladies and gentlemen. 

Thank you for this invitation to update you on our work. 

Today, I would like briefly touch upon 1. the SRB’s Annual Report that was published on 30 June; 2. This year’s IMF’s Financial Sector Assessment Program or FSAP; 3. The recent deal on the Crisis Management Deposit Insurance and 4. The debate on simplification. 

2. SRB Annual Report 2024

A few days ago, the SRB published its 2024 Annual Report. I will not spend too much time on this topic as I have updated this Committee on our progress along the last 18 months.

As we mark our 10 years anniversary, let me just say that banks progressed in several resolvability dimensions. For instance, only three banks in the whole Banking Union have not yet reached their final MREL target. 

Along last year and this one, we sought to simplify our processes so to free up resources for our planned shift towards more testing. Less drafting of new items for the plans more working with the banks to check whether those plans can really work in all situations, for instance with on-site inspections.

3. FSAP

We are not alone in thinking that we have made progress.

The IMF is about to publish its 2025 Financial Sector Assessment Program for the Euro Area. 

Let me give you a couple of previews.

The IMF concluded that the Euro area financial system is resilient. It also highlights significant progress made on resolution preparedness and the operational preparedness of the SRB. 

[A certainly good “bulletin” for our first 10 years!]

Not everything is perfect, though!

The IMF report draws attention on what is still missing to improve the crisis management framework. 

In that respect, for instance, the IMF flagged the need for additional flexibility in resolution.  According to the report, the resolution regime in the Banking Union is more constrained than in other jurisdictions and, crucially, even more constrained than in some Member States. 

I can only agree on the fact that flexibility is of the essence for a successful resolution. 

The IMF also pushed for strengthening liquidity provision arrangements in resolution.

In particular, the IMF recommended a set of actions, including to put arrangements in place for the SRF to provide guarantees to support central bank liquidity to banks in resolution, and possibly an EU fiscal backstop. Last but not least, the IMF called for the European Stability Mechanism backstop to be ratified.

I hope that these IMF recommendations will receive the attention that they deserve! 

4. CMDI and the completion of the Banking Union

Another IMF recommendation is completing the Banking Union – by establishing a European Deposit Insurance Scheme – or EDIS. 

Before talking about EDIS, though let me seize this occasion to commend the ECON Chair, the co-rapporteurs of the Crisis Management and Deposit Insurance Framework review, [together with their staff], the outgoing Polish Presidency and the Commission for striking an important political deal on this file.

We are waiting to see the final text but I can already tell you that we need the practical solutions it contains – as soon as possible. It would be important that CMDI is implemented without delay.

Beyond the package itself, this deal sends a clear message: our policymakers want to advance toward greater financial stability. 

Even if this deal is not as ambitious as we hoped, it does send a good message for the countries in the Banking Union and for those that are planning to join it in the future. 

Policymakers can work together for a safer and prosperous Banking Union.

I hope that this success is the first sign of a momentum towards a complete Banking Union including a European Deposit Insurance Scheme. This would be a true single market for banking services. 

5. Simplification

I know that the SSM Chair earlier today spoke about simplification. Let me add a word on this as well. 

As I mentioned before, we started already to try to simplify our work and the banks’. We are all for simplification!

Though, we should not forget that, in Europe, integration is the true simplification. One framework, instead of 27 – that’s how we simplify banking regulation and boost competition.

6. Conclusion

I have spoken a lot already. So let me conclude. 

We are working very hard to make sure that we are ready for any kind of crisis in this increasingly risky environment. 

The deal on CMDI and, eventually, progress on the completion of the Banking Union – hopefully – will give useful tools to deliver on this objective. 

We don’t know from where the next financial crisis will come. Some say climate, some say geopolitics, some say non-bank financial institutions, some say all of the above. I do think that it is anyone’s guess. 

What really matters is that, when the next crisis comes, we are prepared and we have the right tools to stave off the worse of it. 

The Single Resolution Board – with your help – is getting ready to do just that. 

Thank you.