With this blog post, I will explain the SRB’s approach to the uncertainty and disruption caused to the Euro Area economy by the COVID-19 outbreak.
The world is facing an extraordinary challenge. The pandemic is having a severe effect on people’s health and the global economy. The SRB, like all other organisations and companies, is experiencing some of the impact of the situation first-hand, while continuing to carry out its work remotely.
Likewise, I know that banks are working hard to ensure business continuity and services to their customers, focusing on core operations and critical functions, as well as on protecting their employees’ health.
Now more than ever, European and international coordination and collaboration is key. The SRB supports the steps that the ECB, SSM and national competent authorities are taking to help banks deliver their services to the real economy, and in particular to keep lending.
This is a completely new experience for us all. However, we can take some heart that since the last financial crisis we have put in place stronger supervision and coordination to be able to respond together. The banking sector today relies on more robust capital and liquidity buffers, which allows it to be part of the solution for keeping the economy moving now and once the crisis ends.
The SRB’s approach is to support the banks where necessary with operational relief measures, using the flexibility in the resolution framework and building on the work done so far and the close contact between our teams and the banks under our remit. We can do this without compromising our ongoing focus on resolution planning, with the aim of making banks resolvable.
That’s why we are introducing measures to alleviate the immediate operational burden on the banks under our remit, to allow breathing room to focus their efforts on supporting the economy. We are taking these pragmatic and flexible measures following input from the industry and our financial stability peers, and they have been communicated to all banks under our remit.
The SRB, together with the national resolution authorities, will postpone less urgent information or data requests related to the upcoming 2020 resolution planning cycle. In light of the challenges posed by resource constraints and adverse market conditions, we are ready to address any issues in relation to specific requirements with the banks under our remit on an individual basis.
We also take note of the measures adopted by authorities to provide capital relief to banks in support of the economy. Of course, we will reflect this in our future MREL decisions. In addition, the SRB continues to carefully monitor the market conditions and will assess the potential impact on transition periods needed for the build-up of MREL.
At the same time, the SRB’s continued focus is on supporting financial stability and bank resolvability. It will continue its work on resolution planning and the preparation for issuing 2020 MREL decisions according to the set deadlines in early 2021. A clear picture of the banks’ build-up of MREL continues to be key to resolvability. However, if needed, there will be more leeway on submission dates for some less urgent reports, such as those related to critical functions.
Now more than ever, we need to continue to build on the progress that the industry and authorities have made towards resolvability in recent years. This makes our financial system more stable and stronger to cope with the crisis. The resolution framework and the build-up of MREL will be important tools to help support the economic recovery and a strong banking sector.
It is now a decade since the Liikanen Report was published. While the proposal for structural reform in the banking sector was not implemented in the EU, many of the ideas brought forward by the high-level expert group can be found in in other regulatory...
Euro area banks have emerged from the pandemic largely unscathed, mainly due to the unprecedented support from governments, central banks, regulators and supervisors. Bank capital in the form of Common Equity Tier 1 even increased throughout the pandemic...
Dr Elke König is Chair of the SRB, responsible for the management of the organisation, the work of the Board, the budget, all staff and the Executive and Plenary sessions of the Board. The Strategy, International Relations and Communications Unit and the Internal Audit function report directly to her.
She was President of the German Federal Financial Supervisory Authority (Bundesanstalt für...