Today, I have been invited to speak on the SRB’s annual report for 2022, which was published at the end of last month. There were a number of notable achievements last year, such as successfully dealing with Sberbank, at no cost to the taxpayer, and publishing the resolvability assessment heat map for the very first time. While it is always important to take stock of our performance, I won’t dwell on the past. Instead I will move on to more current items, I mean some lessons on the recent market turmoil, the CMDI proposal, resolvability and the SRM Strategy.
I last spoke here on March 1, and since that time, we have seen major market turmoil in both the US and Switzerland.
It is still difficult to draw final lessons from these cases. There are good elements and bad – among the good, resilience. Among the warning signals: the speed of outflows: once confidence is lost, everything can collapse.
- Among the key lessons for the future, is the need for flexibility as well as predictability; but also:
- clear communication;
- strong cooperation and;
- the need for more transfer tool strategies.
I would also add that there is no need to change everything, or to use the English expression, we don’t need to throw the baby out with the bathwater – instead, we must close the gaps in the current framework:
- Liquidity in resolution;
- Scope of resolution / CMDI;
- And making sure we have more Banking Union, not less.
In this regard, I welcome the Banking Union Annual Report by MEP Kira Peter-Hansen, which was adopted by the Plenary last week.
Confidence is key – and trust is hard won. We have built up that trust over recent years in the Banking Union, thanks to the pillars of supervision and resolution.
Nevertheless, we must remain vigilant and diligently work to promote financial stability.
With regard to the CMDI, the proposals are not perfect but they are a step in the right direction. The SRB agrees with much of the ECB’s opinion, which was published two weeks ago.
The SRB, like the ECB, supports the expansion of resolution in parallel with a more realistic possibility of using DGS in resolution. To allow for that, the SRB, like the ECB, supports the removal of the DGS superpriority, the single-tier depositor preference, the harmonisation of the LCT and so on.
This is because the CMDI goes some way towards strengthening the crisis management tool-set, particularly to enact sales or bridge banks, with a potential use of the DGS to bridge the gap to the 8%, if need be, to access the SRF – the Single Resolution Fund. Of course, I would like to have seen the CMDI go further, but let us not have perfect being the enemy of the good. Something important to note on this: one difficulty, or characteristic, of the proposal is that we cannot easily pick and choose what we want to keep and to remove the rest, since the whole proposal is interconnected.
[4. Building resolvability]
As CMDI is not (yet) in place, my focus today is also on implementing more resolvability under the current framework.
In that regard, despite recent turmoil, MREL continues to be built up. The SRB has decided to maintain its policy on MREL with minimal changes this year. We aim to provide a stable environment in a phase where some banks are still building up their MREL stock ahead of the deadline on 1 January 2024.
We will launch a public consultation on MREL for the 2024 cycle and beyond later this year.
Another important tool to enable resolvability is the Single Resolution Fund. This year, the fund is on track to reach 1% of covered deposits, €77.6 billion.
Let me finish with a few words on the strategic review of our operations. We are just in the making, with a lot of enthusiasm. Later this year, we will finalise our plan, called SRM: Vision 2028. This will the basis of SRB’s work programmes for the years ahead, which are published annually. This new Vision 2028 will better-equip the SRM to deal with the various challenges, to ensure banks can be resolved.
I will stop here. Thank you for your attention.