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Introduction
Good afternoon, Madam Chair, Honourable Members, ladies and gentlemen.
First of all, let me congratulate you - Madam Chair and Honourable Members - for your election.
Those of you who have been in this Committee for longer have already heard me saying this. But I would like to repeat how important our accountability towards this Committee, and thus towards the citizens of Europe, is for our work.
Our job is to ensure that the next bank crisis will have minimal impact on the real economy of our countries, ensuring that your constituents’ savings are safe. The SRB, the Single Resolution Mechanism and the resolution framework at large, are also here to ensure that the next bank crises no longer ravage the finances of Member States - as they have in the past. Bank crises may seem a remote risk and these discussions may seem theoretical. Unfortunately, they are not – as last year’s crises in the US and in Switzerland have so clearly reminded us.
Today, I would like briefly touch upon 1. the status of the banking sector, 2. the work we are doing to make our banks even more resolvable (that is more resilient) and 3. give you our technical view on what improvements could make our framework stronger.
1. Status of the banking sector
In addition, our work on resolvability has been advancing well this year.
Our banks have reached a good level in their resolvability capabilities. This is not only true for large banks – the so-called “significant institutions” – but also for the smaller players in the Union.
All the LSIs are now complying with their minimum requirements for own funds and eligible liabilities (the “MREL”). This means that both SIs and LSIs (besides a few special situations with longer transition periods) are now fully-MREL compliant. Given the industry’s recent results, this progress, by the way, came with no evident impact on banks profitability!
MREL is not the only resolvability dimension. Banks, large and small, have been steadily working towards meeting all our resolvability conditions.
These are all good results, but, as usual, we should never be complacent. Resolvability needs, like risks and business models, evolve over time.
2. SRB Vision 2028 implementation
This is why, earlier this year, I presented to this Committee our new strategy, the SRM Vision 2028. Vision 2028 will make our banks more resilient and the SRB and SRM work more future-proof. We are already working hard on its implementation.
Together with the national resolution authorities, we are streamlining the resolution planning process and the resolution plans, making them efficient and better focused on the most important issues. This will allow us to allocate progressively more resources to the most important topics, using a risk-based approach.
Simplification goes hand-in-hand with testing to assess if banks’ capabilities to support resolution will work in practice. We are developing a plan and a policy framework for this testing work. Another key aim of our strategy is becoming more transparent. As such, the industry will be consulted on these plans and frameworks.
In addition, we are working on deploying the full array of the tools already available in our framework.
This includes on-site inspections. In fact, we established a team dedicated to inspections whilst the related polices are being developed.
A key element of the Vision 2028 strategy is increasing diversity at the SRB, especially in management positions. This work is already well underway with the share of women in our middle management close to doubling since the beginning of my mandate. These things take time and this is just the beginning - of course. To continue improving, we also set-up a diversity focussed working group that will help better identify and address these relevant issues.
3. CMDI and other files
As I mentioned in past occasions, we can only be as strong as our framework. As you know, the Crisis Management and Deposit Insurance framework review (CMDI) is now reaching the trilogue phase. This is a key file for us.
For brevity, let me just say this. This Committee, and the Parliament in its Plenary Session, recognised the practical added value of this reform. This is about, among other things, expanding the scope of resolution to those smaller banks whose failure would endanger financial stability at regional level.
Flexibility is what authorities need to achieve successful resolution decisions. A resolution decision is successful when, indeed, restores financial stability. 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. I fear – again, as a practitioner – that some features of the current texts would not allow us to deliver on the planned results of this reform.
I am deeply aware of the difficulty of this negotiation. In fact, let me take a moment to praise the good work of the negotiators, both here and in Council. A deal is always better than no deal at all. 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.
Finally, talking about Banking Union, its third pillar – the European Deposit Insurance Scheme – is still missing. A common depositor protection is key to achieve an integrated and competitive Banking Union – as Mario Draghi noted in his recent report on European competitiveness.
Conclusion
I have spoken a lot already. So let me conclude.
The SRB, together with national authorities, is working hard to make the Single Resolution Mechanism and its banks future-proof - within the existing framework. Your work, in the next five years, will be crucial to improve this very framework - pushing further the boundaries of what we can do to protect citizens money and financial stability. We are here to support you in this endeavour, whenever you need us.
Good luck to you all!
Thank you.
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