Today, the Single Resolution Board (SRB) announced the amount of contributions made by banks to the Single Resolution Fund (SRF) for 2021. All banks in the Banking Union and some investment firms are required by law to pay annual levies into an emergency fund - the SRF - that can be called on should a bank get into trouble and specific criteria are met. For this year, banks paid €10.4 billion into the SRF.
The target size of the SRF is set at 1% of covered deposits by end 2023. The Fund will end up at above €70 billion, taking into account the current annual growth in covered deposits. The SRF can be used to support the effective resolution of a failing bank, if needed.
The SRF is just one of the tools of the financial stability structure that was put in place in the wake of the 2008/2009 banking crisis. It is being built up over eight years until 2023, and from next year, the Fund will see its effective capacity doubled when the public Backstop to the SRF is introduced.
“We continue to build-up the SRF, which is important in terms of giving confidence to the market in times of crisis. The backstop will double the firepower of the SRF, meaning that from next year, the EU will have an emergency fund worth over €100 billion. This will go a considerable way to ensuring public money does not have be used to bail-out private investors,” said Elke König, Chair of the SRB.
The SRF is made up of contributions from over 3,000 credit institutions and investment firms in the EU’s 21 Banking Union countries. These contributions are calculated according to EU law and collected via the national resolution authorities, with the money then being transferred to the SRF, which is managed by the SRB. Year by year collected funds in national compartments of the SRF are further mutualised, in the third quarter of 2021 already 85% of the funds are mutualised.
About the SRF
The Single Resolution Fund (SRF) is an emergency fund that can be called upon in times of crisis. It can be used to ensure the efficient application of resolution tools for resolving the failing banks, after other options, such as the bail-in tool, have been exhausted. The SRF ensures that the financial industry as a whole ensures the stabilisation of the financial system. All banks across the 21 Banking Union countries must pay a fee annually by law to the SRF. These fees are called contributions. The fund means that taxpayers are not first in line to pump money into a bank, should extra funding be required, since EU law requires all banks to pay into the fund annually. Find out more about the SRF here.
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