[Check against delivery]
Good morning to each of you and thank you joining us today – be it in person or online. I am happy to have this opportunity to talk with you, and I am looking forward to your questions later on.
We rely very much on you to tell our story, the story of the work of the SRB – an independent, self-financed agency of the EU. Our mission is to protect taxpayers’ money from any future bailouts, and promote and maintain financial stability. We do this by working with each bank to make it resolvable. As our experience has shown, we see that the better banks are prepared for resolution, the less likely it is they will go into resolution.
Before I dive into some of our current priorities here at the SRB, I am joined this morning by Tuija Taos, who is our newest board member here at the SRB. She is Director of Resolution Planning & Decisions here at Directorate C. Tuija. I am also pleased to be joined by Sebastiano Laviola, whom a number of you will know already, since he has been at the SRB since he joined in 2019. He is Director of Resolution Policy & Cooperation and so has a central role in developing policy for the SRB and our European and international cooperation.
This morning I want to:
- First take a look at recent events in the banking sector;
- Before then taking a look at current priorities for the SRB;
- And finally looking to the future.
[1. Recent events]
First, to more recent events.
The economic and geopolitical situation is something the SRB is monitoring closely.
We have watched carefully the unfolding events in the US with regard to SVB and then the events involving Credit Suisse. On Credit Suisse, a GSIB, some brief comments: the Swiss authorities clearly took swift action to protect financial stability and financial stability is a common objective. We should also note that this was not a resolution case, but a sort of financial restructuring of Credit Suisse, ending up into a sale to a private bank, with the agreement and support of the Swiss authorities. I will not go into the specifics of the case but I will comment from the perspective of the European resolution authority
- Our resolution framework has a very clear order of bearing losses: shareholders – in our jargon their shares are called CET1 instruments – are the first ones to absorb losses, and only after that would AT1 contribute, and eventually bondholders.
- This has already been applied by the SRB with the resolution of Banco Popular back in 2017, with first the write down of equity and then the conversion and write-down of AT1.
Finally on Credit Suisse, I would highlight the joint statement we issued over that weekend together with our colleagues in the ECB’s SSM arm and the EBA.
Perhaps a word on non-banking financial institutions or NBFI – as the interconnection with the banking sector is sometimes strong. We, at the SRB, are supportive of the Financial stability board on NBFI, for more transparency and efforts on liquidity issues.
I am often asked if current events are of concern to the SRB?
Let me say this – of course we are following these events closely, but the recent global events are simply the current backdrop to the SRB’s work. The events are the context in which we operate.
- Last year, the context was events in Ukraine, and sadly that is still not resolved;
- before that, it was the pandemic;
- and then before that, it was Brexit or other events…
…there is always a backdrop; but the work of the SRB and all of the EU institutions continues to ensure we have a stable financial sector. That brings me to my second point this morning, the current priorities for the SRB.
[2. Current SRB topics]
[CMDI]
There are a number of current topics we are dealing with, perhaps the most recent one from a news point of view, is the publication of the Commission’s CMDI proposal last week, which shows that advancing with the work of building the Banking Union continues as a priority for the European Commission. Over the past ten years, Europe has already made significant progress in establishing a robust framework for dealing with banks in financial difficulties and bank failures. We are in a much better place than we were in 2008 – of that there can be no doubt.
However, there is always room for improvement, so the SRB very much welcomes these CMDI proposals. There is no point in saying they are perfect proposals, but perfect is the enemy of good. And, to be clear, these are good proposals in the eyes of the SRB. If adopted, they will enable EU authorities to manage bank crises in a more efficient and harmonised way.
The proposals contain many positive developments. For example, they clarify the scope of application of a resolution in relation to national liquidation procedures. They also enhance our toolkit for managing bank failures in a way that protects critical functions and citizens effectively. Going forward, it will be key to make sure – throughout the legislative process – that the different parts of the framework can continue to operate as a holistic solution, to ensure we can deal with troubled banks swiftly and with the least possible amount of damage on the wider economy. Should it be needed, I will make SRB staff available to provide technical input to further enhance the Commission’s proposals and ensure that the overall framework is consistent and workable.
[MREL]
Moving onto MREL now, which is like an emergency cushion of money for banks.
Clearly, given the current market evolution, banks are not be able in those days to issue MREL under the same conditions as before. However, let me mention that the gap for MREL shortfalls has been steadily closing through the past months and that we are still optimistic on the targets to be met by the very end of this year.
Shortly, the SRB will issue its updated MREL policy. Perhaps Sebastiano might say a word or two on this point now.
[3. Where to next for the SRB?]
Now, to my third point, looking to the future. As you may be aware, this year, the SRB is reaching a number of key milestones this year.
- We have put in place resolution plans for all our banks;
- The SRF will reach its target amount at the end of this year;
- And banks are reaching the target date for the implementation of our Expectations for Banks;
The milestones we are reaching could be considered phase one of the SRB. However, after eight years of existence, it is time for the SRB to enter into phase two.
I want to see how the SRB could function and deliver better. We are in the middle of a strategic review of the SRB. This is a root and branch review to develop a plan to take the SRB from 2024 until 2028. This will better equip the SRB to deal with the various challenges, to ensure banks can be resolved.
While in phase one, the focus was rightly on putting resolution plans into place, in the coming years, the SRB must shift its focus to make sure that resolution plans can be put into practice effectively. So, what does this mean?
- This means pursuing all our core tasks, obviously, but on top on this, this means testing and checking that the resolution plans actually work in realistic simulations;
- This means having on-site inspections on bank premises;
- And this means continuing with our day to day work on making sure all of our banks are resolvable.
[Conclusion]
There are many other topics - digitalisation, cyber risks, DORA, climate change – to mention just some. However, I don’t want to take up all of the time we have and I know you want to ask questions.
I want to conclude. I am delighted to be Chair of the SRB, leading an EU institution that works to ensure a failing bank can be dealt with swiftly, minimising the damage to other parts of the economy, promoting financial stability; and doing all of this without having to use taxpayers’ money.
That is an institution I am proud to be a part of.
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