[Check against delivery]
[Introduction]
It’s a pleasure to be here today and to meet you all.
Let me start with the Crisis Management and Deposit Insurance framework review, or (CMDI), which is now reaching the trilogue phase. I will then explore our approach to strengthening resolution execution further.
[CMDI]
The European Parliament recognised the practical added value of this reform. This is about, among other things, expanding the scope of resolution to those smaller banks in those circumstances where their failure might endanger financial stability at regional level.
Flexibility is what authorities need to achieve successful resolution decisions. A resolution decision is successful when it promotes financial stability while protecting taxpayers.
From a technical standpoint, the more ex-ante restrictions are imposed on us (for instance on the DGS bridge), the harder it is to deliver on our mandate of financial stability. We fear – again, as practitioners – that some features of the current texts would not allow us to deliver on the planned results of this reform.
We know this is a difficult negotiation, and we are grateful to the negotiators for their commitment to finalising this review. However, if the CMDI reform does not deliver the right amount of flexibility, it risks not adding a lot of value in terms of financial stability.
As I noted, the scope of the CMDI is limited. More fundamentally, looking at the Banking Union, its third pillar – the European Deposit Insurance Scheme – is still missing. Common depositor protection is key to an integrated and competitive Banking Union that delivers for people – as Mario Draghi noted in his recent report on European competitiveness.
[Resolvability]
The SRB is also revising its resolvability assessment, based on an enhanced methodology and the systematic testing of banks’ capabilities. We aim to ensure a consistent ‘steady-state’ approach, now that Expectations for Banks have been fully phased-in, and to incorporate lessons learned from past crisis cases.
The industry will also be consulted on this methodology at the end of the year.
In general, banks have come a long way in meeting the SRB’s resolvability expectations, building up the required levels of financial resources to absorb losses and recapitalise, as well as developing capabilities to ensure continued operations in a crisis. By the end of 2023, except for a few banks which have a longer transition period, all banks under the SRB’s remit have met their MREL requirements.
Going forward, there will be increased focus on banks conducting resolvability self-assessments and regularly testing their ability to be resolved. This also means that banks are expected to take an even stronger role in assessing and ensuring they are resolvable and prepared to respond to any type of risks or crisis scenarios.
[Building in testing and deep dives]
Resolvability testing is a key component of crisis preparedness and resolution planning. We have been testing banks’ capabilities for a couple of years. This year, for instance, all banks under our remit with a resolution strategy have been asked to test their liquidity and valuation capabilities.
In 2023 banks have been asked to produce over a five-day period the “Joint Liquidity Template” developed by the SRB and the ECB. The aim of the exercise was to demonstrate their ability to swiftly measure and accurately report their liquidity requirements and resources. While the testing exercise was broadly successful, some banks still need to address shortcomings related to data quality issues and the timeliness of the data provision. This exercise is repeated in 2024.
In addition, this year banks have been asked to carry out a simulation of a bail-in, which is a key resolution tool that allows the write-down of debt owed by a bank to creditors or its conversion into equity to absorb losses and stabilise a failing bank. The banks were also asked to simulate producing the necessary data for a valuation in a 24-hour time period. This exercise help show where more automation would be needed.
The SRB is currently developing its operational guidance for bank-led tests and will develop a comprehensive multi-annual testing program spanning from 2026 to 2028.
At the same time, bank-led tests will be complemented by deep dives and on-site inspections carried out by the SRB and National Resolutions Authorities, which will be the focus of the SRB forward-thinking strategy.
Between 2021 and 2023, the SRB conducted 45 deep dives, which have proven invaluable.
45 deep-dives on 32 banks, covering around 16 Member States. The most frequent topics being deep-dived were MREL (governance arrangements, funding strategy and compliance check), LDR (information generation and data quality of the liabilities data report i.e., relevant to set banks’ resolution strategy and calibrates the MREL requirements), OCIR (contracts repository, service catalogue and inventory of relevant operational assets and staff) and SRF (reporting for the calculation of the contributions);
In line with previous cycles’ results, the 2023 deep dives have shown that the banks obtained an advanced awareness in terms of MREL. However, although the banks have invested in MIS and improved their data automation, there is still room for improvement in terms of manual adjustments and information gaps; Finally, in 2024 and 2025 the SRB is enhancing its deep dives framework in order to assess further resolvability areas in addition to the ones mentioned above.
Therefore, moving forward, the expansion of these inspections and their integration with testing results will ensure a comprehensive and risk-based resolvability assessment, helping us make sure that authorities and banks are operationally ready for resolution.
[Outreach and working with the community]
Effective crisis preparedness first and foremost depends on close collaboration with National Resolution Authorities in the single resolution mechanism. We also work closely with other public authorities such as the single supervisory mechanism – and with partners in resolution across the world. By working together, we ensure that our strategies are aligned and our responses coordinated, which strengthens Europe’s ability to manage banking crises efficiently and maintain financial stability.
Likewise, outreach to the banking industry and other market participants and stakeholders is crucial. By engaging with banks, we better understand their challenges and provide clear guidance on what is expected in terms of resolvability. The open dialogue we have with banks improve their preparedness.
Earlier this year we published a full list of the consultations and requests that banks could expect, and we will continue to increase our transparency and engagement.
[Conclusion]
Let me come to a close here – I am looking forward to your questions.