Topical developments in bank resolution - keynote speech to the World Bank/FinSAC Annual Conference 2025 by Karen Braun-Munzinger

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[Opening] 

Ladies and gentlemen,

It’s a pleasure to be with you today to address one of the most important aspects of ensuring financial stability in Europe: the cross-border implementation of bank resolution.

Resolution, and more broadly crisis preparedness, is key to a resilient system. It enables authorities and market participants alike to manage shocks and failures so that the financial system can adapt. This complement to risk mitigation makes the system overall stronger.[1]

We see both in crises and out of them that working on resolvability and crisis readiness pays off – in today’s world and in being ready for an uncertain future. That doesn’t mean that it is easy. We know there are many questions that authorities face in working on resolution readiness. I am particularly happy to have the opportunity to discuss this with you today, and I am sure we will have many ideas coming up in the interactive sessions.

The Single Resolution Mechanism is celebrating its 10^th anniversary this year. Over that decade, thanks to the work of resolution authorities, supervisors and the banking industry, we have built up resolvability and worked on enhancing our crisis readiness. This has been a shared journey. Banks have restructured their balance sheets, issued significant volumes of eligible liabilities to meet MREL requirements, and invested in recovery and resolution planning, data capabilities, and governance frameworks.[2] And authorities have set up structures for cross-border cooperation, built up knowledge and processes on how to handle crisis cases and used dry runs to test and challenge.

When difficulties emerged – such as in the cases of Sberbank Europe AG and Silicon Valley Bank's UK operations – authorities were better prepared. Thanks to cooperation and planning, critical functions were maintained and contagion was avoided without taxpayer resources. We have seen, in real time, how resolution frameworks can safeguard financial stability and public trust. 

But we cannot stop here. 

The financial system, closely interconnected with the real economy, is an inherently complex system of systems[3] – this is the consequence of financial integration and risk-sharing. And it is inherently dynamic – the consequence of innovation and development – arguably leading to more complexity over time. That makes it a powerful driver of economic progress. But it also means that it is vulnerable to shocks, with little predictability on crises.    

This is not a "set and forget" framework. It is a living system that must continuously adapt, be stress-tested, and be maintained – not just for the usual financial shocks, but also for new and emerging risks. Those risks range from large-scale cyber incidents, over IT disruptions, third-party dependencies, or operational failures with systemic consequences to geopolitical risk. These shocks may not originate in financial markets, but they can quickly spill over into financial stability if not properly contained.

The implementation of the Digital Operational Resilience Act (DORA) is a good example of the frameworks adapting. It not only enhances the industry's preparedness for operational risk, but also complements resolution planning by ensuring the continuity of critical services and reporting even in extreme scenarios. 

Let me now give you a sense of what is particularly important here in the next few years, looking first at the fundamentals both at EU and global level, then at banks’ and authorities’ capabilities, and, finally, at legislative enhancements and the strategic outlook.

[I. Fundamentals – EU and Global]

At the global level, the Financial Stability Board's (FSB) Key Attributes of effective resolution[4] remain the bedrock. Their implementation across jurisdictions continues to progress. The FSB has continued to assess the functioning of the framework and work on evolving guidance where necessary – most recently through its review of the 2023 bank failures[5].

That Credit Suisse case reinforced some fundamental principles: the importance of early escalation, timely decision-making, and effective communication to preserve market confidence. But it also highlighted areas where more progress is needed, including ensuring clarity and transparency in loss allocation, and strengthening coordination among home and host authorities. Progress here will further enhance our ability to deal with these complex cases. 

The speed of the bank run on Silicon Valley Bank demonstrated how quickly crises can escalate in the digital age. It also underlined the importance of  loss-absorbency resources and credible public liquidity backstops, as well as the need for close coordination across borders. 

The FSB work programme for 2024-25 responds to those findings. It prioritises areas that are highly relevant for the EU context: enhancing liquidity preparedness in resolution, reinforcing operational continuity of critical services, and improving the effectiveness of cross-border cooperation and information-sharing. These are not abstract priorities – they are the operational backbone of credible and executable resolution plans.

In the EU, the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) provide a solid legal and institutional foundation. The Banking Union and the Single Resolution Mechanism have brought consistency, transparency, and forward planning to resolution work. Yet, we must recognise that while the framework is robust, its application still faces hurdles. Implementation continues to vary across Member States, and legal divergences – in areas such as creditor hierarchy, the recognition and execution of transfer tools, and insolvency law – can complicate resolution planning and affect the credibility of action, particularly for cross-border groups.

Internationally and locally, strong frameworks are in place. But using them successfully depends on our ability to apply them consistently, test under realistic conditions, and refine based on evolving risks and experience. That is especially true in cross-border cases, where managing legal and operational complexity is essential for resolution to succeed in practice – not just in theory.

[II. Bank Capabilities]

Turning now to banks’ capabilities. They have made significant strides. For example, banks are required to hold enough money and certain types of debt – so called Minimum Requirement for Own Funds and Eligible Liabilities (MREL) resources – so they can be “resolved” safely, meaning that they can either be restructured or wound down, without harming the wider economy. Such MREL resources have been built up, funding structures have improved, and recovery and resolution planning has matured. Many institutions have invested in internal capabilities, improved their governance arrangements, and engaged in dialogue with resolution authorities. Some conduct internal dry runs or set up dedicated resolution teams – demonstrating a growing awareness that resolvability is not just a regulatory obligation, but also a pillar of sound risk management and resilience.

Given the good progress on planning, this practical focus on operationalising those plans is central to the SRM medium-term strategy. Resolution must be executable, not just theoretically sound. This means ensuring that the necessary IT systems, data flows, legal documentation, internal decision-making channels, and external communications are in place and tested. 

The SRB is among a number of authorities which are stepping up on-site inspections, and conducting deep dives with banks into operational continuity, governance, and liquidity in resolution. Expectations are becoming more granular. Banks must demonstrate not just that they have a plan, but that it can be executed in practice, under pressure.

We are in the era of resolvability testing. This is a positive and necessary development. It reflects that the framework is maturing – not only in its design but in its demonstrated usability. The ability to execute under pressure, in real time and with full coordination, will be the true measure of whether our collective efforts have succeeded.

[III. Authorities Capabilities]

Authorities, too, have come a long way. We are meeting in resolution colleges and fostering shared understanding through bilateral and multilateral international cooperation. These structures have helped foster a shared understanding of roles, tools, and expectations, especially in the heat of a potential crisis. Importantly, they also build the relationships of trust that are indispensable when quick and decisive action is needed across borders. 

The Crisis Management Group, or CMGs, established for each globally systemic bank, bring together home and key host resolution authorities, supervisors, central banks, and relevant ministries of finance to coordinate resolution planning and crisis preparedness. They are essential to ensuring that when a cross-border institution runs into trouble, authorities can act quickly and consistently, based on shared information and pre-agreed strategies.

But we must not rest. In times of geopolitical tension, economic uncertainty, and growing non-financial risks, the need for clear communication and practical coordination is greater than ever. It’s not enough to meet once a year and review documents. We need to talk regularly, challenge each other’s assumptions, and continue to build trust and preparedness across jurisdictions and institutional mandates. 

That means more dry runs together, more real-time simulations, and a deeper commitment to operational readiness. And it means continued support for working through the FSB.

We recently saw an example of such cooperation in the Nordic-Baltic cross-border dry run, where authorities from multiple neighbouring countries and European authorities came together to test their crisis coordination mechanisms, information-sharing processes, and decision-making timelines. This exercise illustrated both the value of regional cooperation and the practical challenges of managing resolution across closely integrated but sovereign jurisdictions. It also highlighted the unique importance of ensuring operational continuity and liquidity access for cross-border subsidiaries in highly interconnected banking groups.[6]

The takeaway from all of this is clear: Resolution is a team effort. And teams only perform under pressure if they have practiced together. Our ability to protect financial stability in a crisis depends not just on the rules we write, but on the readiness we rehearse.

It is fantastic that, at this conference, too, this operational focus is being put into practice through interactive sessions. I am sure they will bring the topics to life and prompt further exchange. 

[IV. Legislative Enhancements and Strategic Outlook]

Let me move on to my last area of focus – legislative enhancements and the strategic outlook. In the EU, resolution authorities benefit from a robust and comprehensive toolkit. Lessons from real-life cases have been instrumental in guiding and reinforcing ongoing efforts to enhance the EU resolution framework over the years.

The EU is now in the process of finalising a review of its Crisis Management and Deposit Insurance (CMDI) framework. This work follows a 2022 call by Eurogroup finance ministers, who agreed that the current set-up needed improving, especially when it comes to handling the failure of mid-sized banks. They asked EU lawmakers to make resolution tools more usable and consistent, to make sure deposit guarantee schemes can be used more effectively in crises, and to ensure banks are treated more equally across Member States.

As the SRB, we fully support the objectives of the CMDI reform and its swift finalisation, and we are ready to implement whatever the EU co-legislators agree. 

However, as practitioners we also believe it is important to ensure the framework is workable in practice. In this respect, it is crucial to: (i) provide credible and rapidly deployable funding for the resolution of medium-sized banks; (ii) ensure that rules within the Banking Union are as clear and operational as those outside it; and (iii) avoid unnecessary complexity in the decision-making process, so that resolution authorities can act swiftly and effectively in times of crisis.

Getting the CMDI right is also a key enabler for advancing the broader agenda of completing and deepening the Banking Union. Once this important reform is in place, we’ll be better positioned to tackle the remaining building blocks:

• A fully mutualised European Deposit Insurance Scheme (EDIS), which would provide equal protection for all depositors across the euro area, reinforcing trust in the system regardless of where a bank is located;

• And a credible framework for liquidity backstop, which is essential to maintain market confidence and financial stability at the critical moment when resolution is triggered.

Completing the Banking Union isn’t just a technical goal, it is a political and economic necessity. It’s essential to protect financial integration, ensure that Europe can handle future crises, and to strengthen our competitiveness on the global stage.

[Closing]

Ladies and gentlemen, I am drawing to a close. 

I think about successful resolution as a really excellent musical performance. There will always be surprises on the night. In order to turn into a harmonious whole, everyone needs to be individually proficient in their craft, practicing ahead of time, understand and agree on the underlying rules and listen to each other.

Cooperation and collaboration are the pillars of resolution success. We must continue to invest in our partnerships, foster strong resolution colleges, and coordinate through international bodies like the FSB.The effectiveness of our collective response depends on the relationships we build before a crisis, and the trust we maintain under pressure.

Because ultimately, resolution is not just a technical exercise. It is about protecting people’s savings, ensuring trust in our financial system, and safeguarding the real economy. Let’s make sure we’re ready, together.

Thank you.