"The resolution framework as insurance for continued growth" speech by SRB Chair Dominique Laboureix

Financing Europe 2025 conference: Investment that supports society 

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Ladies and gentlemen, first, let me thank David for this introduction and for inviting me to speak here to you.

This morning, we have heard interesting and innovative ideas on how finance and financial regulation can help to shape a more competitive Europe.

Today, I would like to focus your attention on how to ensure that Europe stays competitive in the long run.

This discussion can be framed in my view around three connected concepts: competitiveness, simplification and volatility.

1. Strong institutions and clear rules make us competitive

Since the Draghi report, competitiveness has become one of the most relevant item of the European Union’s agenda. And, with good reasons.

It goes without saying that banks play a critical role in delivering a more competitive economy.

Banks, like any company, have their best opportunity to grow and innovate if they operate in large competitive markets with clear rules, enforced by smart authorities. In such an environment, banks can best contribute to the financing of our economies.

Policy makers and authorities are instrumental for creating this good environment for growth. The Single Resolution Board, like many of the authorities represented here today, plays its part in this endeavour.

We do have a peculiar role as we really work to limit the downside risk that inherently comes from the banking business. To fulfil our mission, we have extensive powers in case of a banking crisis and we prepare banks, in peace time, for such crises.

This preparation work builds resilience into the banking system and, in a virtuous circle, makes it more competitive by limiting its downside risks.

It is all about building confidence!

Let me make a couple of examples:

First example. Banks have been working for ten years on building their MREL stacks. Now, besides four very special cases, they are fully compliant. MREL not only makes banks more resolvable in a crisis, it also makes them more resilient in their everyday life. European banks, for instance, even use MREL issuances to gain rating notches on their senior tranches.

Nevertheless, some European banks have been complaining about international level playing field. We need to be cautious here. Comparing only the percentage requirements in different jurisdictions is not enough. The wider picture matters.

In fact, the prudential metrics behind MREL and TLAC — risk-weighted assets and leverage — are calculated differently in the Banking Union and the US. Adding to this complexity, macroprudential frameworks and key structural differences make cross-country comparisons far from straightforward.

In addition, international competition between banks exist only on a few specific businesses, like trading. Domestic activities, which are the vast majority of the European banks’ business, are hardly affected by supposedly lighter prudential requirements “across the ocean”.

Second example. the Single Resolution Fund is now full. These 80 billion euros, contributed over the years by the banks in the Banking Union, are there in case any of the banks gets in trouble. We can use them to protect financial stability, shielding the rest of the sector from potential contagion. The Single Resolution Fund truly is a rainy-day fund.

By the way, banks did not have to pay contributions to the Fund in 2024 and won’t have to for 2025 either.

The message here is that investing in a solid resolution framework yields in additional resilience during tougher times. This is why, when talking about competitiveness, we should not only focus on eliminating requirements but on having the best possible environment to compete – at all times.

The Savings and Investment Union aims to connect European savings to the most productive European investment. This is absolutely necessary if we want to develop an industry fit for the challenges of our times.

However, such a Union will only work if investors have continued trust in the markets and in the institutions that underpin them. This is exactly what the resolution framework does. When a bank crisis happens, and it will happen, we are there to ensure that this trust is preserved.

If you think about it, a well-equipped crisis management framework can be the foundation of a dynamic and resilient banking sector.

The “and” is important. I do not see an incompatibility here.

Of course, this does not mean that we favour ever-increasing buffers. Quite the contrary! In our latest update of the MREL policy, we actually lowered the MREL requirement for the most resolvable banks – acknowledging their good risk reduction work of the last years.

2. Simplification through the Single Market

The link between competitiveness and simplification is clear.

Clearly, though, simplification should be guided by a simple principle: slash redundant rules while preserving the objectives of the regulation. With the second part of the sentence being as important as the first one.

Resolution needs to remain a credible option to ensure financial stability. This can only happen if banks have the right capabilities in place, with an adequate buffer of loss-absorbing liabilities and robust management information systems that allow them to produce at short notice the information and data required for a bail-in or a valuation, key ingredients to a successful resolution.

Let me also add that the debate so far has focused very much on reducing this or that requirement. And I understand it - Level 1 and level 2 guidance are quite extensive, to say the least.

But, by only looking at simplifying the existing legislation, we may be overlooking the other side of this problem. Our market is also complex because it is fragmented. Within the Banking Union – supposedly a single market for banking – we have, for instance, different (often unpredictable) taxation, different insolvency rules, uneven protection for depositors, less-than-straightforward fears of mergers within the Banking Union... I could go on.

Ladies and gentlemen. Fragmentation works against simplicity. One framework is simpler than 21, let alone 27.

By working towards a Single Market, in my view, policy makers can deliver extraordinary simplification in the regulatory framework that companies face.

3. Insuring more volatile times

Finally, these are volatile times – a rapidly changing world.

In this context, it is all the more important to ensure that incentives for shareholders and bondholders are set right. And, in case things go wrong, that banks and authorities are well equipped to deal with the fallout.

We should be glad that we worked well in setting aside funds and building capabilities to deal with these difficult times. This hard-earned gain deserves recognition, but the focus must now shift to banks’ ability to deploy these resources in a crisis—a central theme of the SRB’s strategy.

Preparing for tougher times is exactly what resolution planning has been all about for the last ten years. It is important not to backtrack and preserve these achievements.

The work done so far will help protecting us from the downside of this volatility.

4. Conclusions

Let me conclude.

Financial stability is the bedrock of a healthy, dynamic and competitive economy.

In the darkest times, the resilience that resolution planning work builds in the banks, protects depositors, taxpayers and bottom lines alike. Bankers should not forget this when speaking with their policy makers.

In this vein, a complete crisis management toolkit together with work carried so far by European banks act like an insurance policy on European competitiveness and a precondition for a successful Investment and Savings Union in the long run.

Let’s also remember that a less fragmented market is a conduit to more competitiveness. The Banking Union is proof of this fact.

My hope is that the SRM work for the next years will help to make the Banking Union, and the whole European Union, even more resilient, hence promoting its long-term competitiveness.

Thank you for your attention.