Q1/Q2. Format of self-assessment template: Is the Excel format adequate for the bank to provide the information needed to assess the resolvability of the bank to provide justification? If not, please suggest alternatives.
In our view, the Excel format appears to be fundamentally suitable for presenting the elements required for a self-assessment for each dimension (including evaluation, justification and the measures to be taken). However, the expected length of the comments for some elements does not suit an Excel cell.
In addition, it is not clear to us how the SRB decides on the bank’s eventual resolvability. The weights that the SRB assigns to the individual expectations are also not disclosed in the template. In our view, the bottom-up approach and the associated depth of detail - as well as some duplication - are a hindrance to a comprehensive overview of a bank’s resolvability.
Q3/4: Scope/frequency: Are the envisaged scope of application (at the resolution group level, covering also non-resolution entities) and frequency (yearly) for the submission of the self-assessment report well calibrated? If not, please explain.
Frequency: the self-assessment report should be submitted every two years
On the one hand, the relevant EBA/GL/2022/01 in conjunction with EBA/GL/2023/05 expects a self-assessment report to be submitted to the resolution authorities every two years. On the other hand, the SRB expects the self-assessment report to be submitted annually. We ask the SRB to explain why a submission every two years is not considered sufficient.
The EBA had also deliberately opted for a two-year cycle cf. EBA's feedback in the course of the consultation on EBA/GL/2023/05 (EBA/GL/2023/05, p. 32): “From a practical perspective, however, resolution work usually extends over several years and a look at international practice argues for a reduction in frequency. In particular, this would give the authorities more time to review and the institutions more time to restructure.” In line with the EBA's recommendation and to reduce bureaucracy and respect the principle of proportionality, banks should only be requested to submit the self-assessment report every two years.
Furthermore, the fixed submission date of the self-assessment report on January 31st should also be changed to adequately consider the outcome from resolution reporting (e.g. LDR, CFR, FMIR, CIR) that is currently due at end of April. In that sense, a fixed submission date of May 31st of each year would be more suitable for banks and IRTs.
Scope.
Non-resolution entities: we would appreciate any clarification regarding the inclusion of the non-resolution entities in the scope. It is not clear enough the extent to which they must work on their self-assessment. In fact, we do not see the envisaged scope as good calibrated, as we oppose the inclusion of “non-resolution entities”. Non-resolution entities don’t have to fulfil most of the capabilities. An aggregated reporting on resolution and non-resolution entities would mix up the assessment of resolution and non-resolution entities and lead to a distorted picture. Furthermore, the reporting burden for non-resolution entities would be extremely high.
Banks whose resolution strategy has just been changed from liquidation to resolution: self-assessment should only be requested for the requirements that need to be met according to the phased-in approach defined by the IRT. Only when the bank concerned has fully built up the necessary Expectations for Banks (EfB) capacity should the full scope of the resolution self-assessment apply. As set out in the “Operational guidance for banks on resolvability self-assessment”, targeted measures are only formulated in relation to the principles for which the phased introduction has already begun in recent years. A phased introduction of resolvability self-assessment would allow banks to focus on the issues and allocate their resources according to the timetable set by the IRT.
Banks under an MPE strategy: it is not clear what is meant with “For banks under an MPE strategy with the ultimate parent entity within the BU, in order to ensure there is a single point of contact and holistic view at the level of the ultimate parent entity, the self-assessment report should be centralized and submitted to the SRB by the ultimate parent entity.” Our understanding is that all BU resolution entities have to make their self-assessment and that the ultimate parent entity within the BU should submit a centralized self-assessment report to the SRB for these BU resolution entities. In our view this contradicts partly the MPE strategy, where each entity is doing its own reporting and submitting it by its own to SRB/NRA. Moreover, a summarized report will not reflect the achievements and status of individual RGs and an assessment per RG is not given and might impact wrongly the MREL decision.
Q5/6: Granularity: Is the overall content and the number of capabilities described in the self-assessment template sufficiently detailed and comprehensive to cover the spectrum of progress made by banks? If not, please propose some concrete examples of new capabilities you would suggest introducing.
Basically, we think that a principles-based rather than a rules-based approach should be pursued as currently applicable. This would significantly reduce complexity and workload.
Furthermore, the template for the self-assessment is too detailed, and as such imposes an administrative burden on banks. This granularity runs the risk of taking the form of a checklist (which is discouraged in the guidelines themselves, see p. 18) rather than being a living document that can sometimes be tailored to the specifics of the bank.
The SRB also expects the submission of a self-assessment to have a different structure and content than the relevant EBA/GL/2022/01 in conjunction with EBA/GL/2023/05. We kindly ask the SRB to clarify which requirement applies to banks (EBA Guidelines or Expectations for Banks (EfB)).
When reviewing the “Self-assessment template”, we note that only some of the expectations set out there are to be found verbatim in the EfB. We kindly ask the SRB for clarification. It would be helpful if the SRB could provide a list of which specific expectations are contained verbatim in the EfB and which expectations do not originate verbatim from the EfB. This would make it much easier to deal with and evaluate the requirements.
At the technical meeting on January 14, 2025, the SRB explained that, in its view, the publication of the detailed capabilities would now give the banks sufficient time for implementation to submit their self-assessments based on the new requirements from 2026. However, this deadline is too short to assess the far-reaching capabilities (gap assessment) and implement the new capabilities (with an as yet unknown number and as yet unforeseeable implementation effort). The SRB itself had promised appropriate implementation deadlines, see the SRB's blog post at: https://www.srb.europa.eu/en/content/srbs-new-heat-map-approach-enhance…. It states: “Horizontal progress levels are set consistently with the phase-in of the Expectations for Banks and the MREL transition periods, allowing appropriate time for banks to develop adequate capabilities in each area.”
Q7: Advanced capabilities: Level 4 represents advanced capabilities providing more granularity on the extent to which certain banks demonstrate their crisis preparedness. How can these capabilities be set out best to support banks’ work on ensuring resolvability? Would you recommend that additional capabilities be added to Level 4? If yes, please detail.
ESBG understands that Level 4 capabilities would represent the best practices in the sector, with the risk that these best practices sometimes do not respect the principle of proportionality or are not applicable.
In our view, the extended capabilities required at Level 4 capabilities go beyond the formal requirements for resolvability. It is therefore our understanding that the resolution authorities should not request a report on the fulfilment of the Level 4 capabilities in the self-assessment. De factor, the implementation of remedial measures for Level 4 capabilities should not be mandatory. We believe that it is disproportionate to impose a reporting obligation on smaller and medium-sized banks regarding the fulfilment of Level 4 capabilities.
We consider interesting to add blank fields in the self-assessment template for banks to identify any best practices on top of Level 1 to 3 capabilities to evidence those banks which are fulfilling the expectations or adequately progress on a certain dimension/principle.
Q8: Variant strategies (I): In order to assess progress on the operationalisation on the variant strategy, would you prefer to reflect such progress in one single column of the self-assessment template covering both Preferred Resolution Strategy (PRS) and Variant Resolution Strategy (VRS) (if applicable) or in two separate columns of the same template? Please explain.
Some members believe that the best way would be to capture it in two separate columns, so that progress on the preferred resolution tool (main focus) is clear from progress on a potential VRS that some institutions are still developing.
Some other ESBG members would prefer to reflect progress in one single column. Some questions are common to all strategies and the answer would be the same (i.e. Governance questions) while other questions are applicable to only one type of strategy. Therefore, the statements would largely be duplicated in two columns, which would not make processing more efficient. In addition, different explanations or assessments for each strategy can also be presented in one column/cell, especially as complete capability from the perspective of the authorities is only likely to be given if there is a complete operationalization for both preferred strategies, which in turn makes separate columns unnecessary.
A combined approach with sufficient flexibility could be the way forward.
Q9: Variant strategies (II): In your view, which resolvability capabilities included in the self-assessment template are the most relevant for assessing the operationalisation of the VRS as compared to the PRS?
Although the response mainly depends on which preferred and alternative resolution tool each entity has (bail-in vs. transfer strategy), we have identified the capabilities related to principles 1.4, 4.3, 5.1, 5.3 and 7.2. as most relevant for assessing the operationalisation of the VRS.
Q10: Market transparency - aggregated level: What level of detail would you consider useful for benchmarking (e.g. by business model or bank size or by country)?
It would be interesting to have information by country, preferred resolution tool and size of the bank. Business model, although it could be interesting, might generate information that is difficult to interpret or understand.
Q11: Market transparency - individual level: Banks remain free, at their discretion, to disclose information on their resolvability progress and related activities and/or to make reference to potential authorities’ publications. Would you envisage such disclosures, if applicable, for your bank? If not, what considerations/concerns do you have in this regard?
Generally speaking, it is necessary for institutions to have the highest possible degree of transparency in order to be able to manage MREL effectively. Having comparable information would always be beneficial for analysis.
Having said that, we have several comments:
The tool (Excel) does not generate any numerical, semaphore, or qualitative results, which makes it difficult to assess progress objectively. A rating system or a similar tool would be valuable in a self-assessment exercise.
It would also be helpful for the bank to understand in advance the SRB’s expectations regarding disclosures by banks.
From our perspective, disclosures by institutions would largely depend on market appetite and pressure for information on resolvability progress.
On the other hand, it would be useful to clarify whether the SRB in this question is referring to disclosures related to the results of the self-assessment, or the assessment made by the SRB.
Nonetheless, it is important to mention that while transparency is always something to be encouraged, there are also reasons for not disclosing progress on resolvability to preserve the stability of the financial system. These are some reasons:
Risk of misinterpretation: compulsory disclosure of certain results/information might lead to misinterpretation by the market, potentially affecting the bank's reputation and resulting in undesired addition-al pressure on the bank.
Competitive sensitivity: revealing too much information about a bank's resolvability strategy might expose vulnerabilities to competitors.
Regulatory uncertainty: if the expectations for disclosures are unclear or evolving, premature disclosure could create confusion or misalignment with regulatory requirements, leading to doubts in the market about why some entities disclose while others do not.
Q12: Scenarios-based assessment: Do you agree that the self-assessment could be completed under different scenarios or crisis events (e.g. defined by the resolution authority) to achieve better preparedness? Please comment.
The EfBs cover testing capacities under stress scenarios. The supervisor should set these potential stress scenarios so that they are comparable information. We are talking about temporary stress, resource stress, etc.
While the incorporation of crisis scenarios could enhance transparency on preparedness for specific scenarios of crisis events, the following reasons explain why the resolvability self-assessment does not seem to be the right place for crisis scenarios:
Our member’s experience suggests that defining and including multiple scenarios adds far-reaching subjectivity and complexity. This may hinder the objective of providing a clear, measurable assessment of resolvability. A more streamlined approach focusing on core capabilities is more effective in our opinion.
It is not foreseeable which scenario will lead to resolution. We believe that the resolution strategies are the scenarios under which the self-assessment is carried out. Further scenarios do not appear to be necessary, as the preferred resolution strategies should be viable and implementable in all crisis scenarios. The scenario-based approach is already reflected in other resolution planning documents such as the Business Reorganization Plan and/or the Sale of Business Playbook for example (where applicable).
The self-assessment is already very extensive and involves a considerable amount of work, particularly as a result of the requirement to justify and substantiate the classifications in detail and to define remedial measures. A “scenario-based assessment under different scenarios” would mean multiplying this workload “times x”, which seems neither reasonable nor feasible.
In the Technical Meeting on January 14, 2025, the SRB stated that “In order to ease the resolvability assessment, the process is further broken down in different steps.”. Such a breakdown does not make the assessment simpler, but more complex. In our opinion, there needs to be more stability in reporting instead of continuous changes to existing standard formats. Banks should be resolvable, and, in this respect, there are minimum requirements that should be met. The assessment should focus on these core requirements and not degenerate into a detailed review of banking processes and market conditions. In the technical meeting, it was conveyed that the expectation is “what are the measures that will be taken by the bank to fully meet the capability”.
We conclude the preparedness for specific scenarios or crisis events is better assessed via testing than it would be in a resolvability self-assessment.
Q13/14: Link to testing: Is the self-assessment template adequate to identify the areas that have been tested/ to be tested? If not, please explain.
Yes
Additional comment(s)
We appreciate the SRB’s transparency by which it consults the industry before issuing new guidance. ESBG is committed to contribute to the process in a coherent way. Furthermore, we also appreciate clarification of the concept of level playing field.
Last remark regarding the dimension n°5 - Information systems and data requirements (MIS) - in the template. So far, the resolvability self-assessment included MIS principles related to separate dimensions in the respective dimension. Now the MIS dimension includes principles related to FMIs, OCIR, BRP, Liquidity. The MIS principles for the respective dimension should be reflected in their tabs.
Name of the organisation: European Savings and Retail Banking Group