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Introduction
Ladies and Gentlemen, fellow speakers, distinguished guests, good morning.
I want to wholeheartedly welcome each of you to this, the fourth Annual SRB Conference. Today, we are lucky once again to have so many high-level and distinguished guests as part of our panels and as speakers.
The theme of this year’s conference is ‘Turning Policy into Action’. Let us reflect on that as we open today’s proceedings. Two years ago in 2017, we focussed on “Building resolvability together”; the shift in our theme is reflects the fact that we are now in a phase where the SRB is focussing on the implementation of policies that have already been put in place. We put them in place together with the NRAs; the implementation means that banks will have a greater role to play in making themselves resolvable.
The message, is that it is not only important to develop policies, legislation and regulation, but it is equally important to ensure that those policies are implemented and become part of banks’ DNA. This way, we turn policy into action!
We constantly assess and monitor the impact of our policies and adjust them proportionately when necessary – in a way, it is like undergoing the aircraft maintenance operations mid-flight to ensure we can continue the journey without interruption.
Through the effective implementation of policies, we can ensure resolvability of every institution, and thus we can promote financial stability. We must also keep in mind that there will always be damage when dealing with a failing bank. Resolution is simply a way of restricting the spill over of that damage.
Examples of turning policy into action
The SRB has been busy in the past year, working with industry and our National Resolution Authorities in order to implement a number of policies in the spirit of cooperation and transparency. I’m going to mention just a few here this morning:
The latest SRB MREL policy, published in January, enhances the quality and quantity of MREL by introducing a series of new features to strengthen banks’ resolvability.
In February this year, we published our Framework for Valuation. This Framework is about ensuring the consistency of the valuation reports which inform the decisions of the Single Resolution Board. Though directed at the independent valuation experts, the institutions will also benefit from a better understanding of valuation in resolution which will help them to increase its preparedness for resolution, ultimately improving their resolvability.
As you may be aware, the EBA is currently finalising its work on data requirements or valuation in which the SRB participated.
This summer, we published a paper outlining our approach to an important element of the resolution framework, the Public Interest Assessment. The document gives clarity to the factors the SRB takes into account when conducting a PIA, and explains how the SRB applies the criteria as set out in EU law. The publication of the methodology is aimed at providing more transparency and certainty for banks and the markets. The resolution framework as an exception to normal insolvency sets strict conditions and the Public Interest Assessment is a core element in this context.
Soon, we will publish our Expectations for Banks document, on which you will be consulted, in line with our drive to work with industry in a transparent manner. These ‘Expectations’ will be our benchmark and guidance on what are the considerations for being resolvable in general terms.
And of course our focus is as before on cooperation within Europe but also internationally. Banks are active cross-border and there is no alternative to cross-border-cooperation of resolution authorities. We have put into action a number of international cooperation agreements. I’m pleased to announce that tomorrow, we will formally finalise a new arrangement with our friends in Japan[1], the JFSA.
Finally in terms of action, we have already had to deal with a number of crisis cases in the past four years – with the most recent being in August this year - and the experience gained in these cases is of course very useful for the SRB’s actions going forward.
Other areas where work is still needed
Although we have been very busy putting policy into action, there is room to do more on the policy side!
The backstop to the SRF had been a long-running debate, but hopefully it will cross the finishing line very soon. The backstop will be an important buffer in giving the markets confidence in a time of crisis or resolution.
Liquidity in resolution is a key gap in the framework. The SRF could play a role in liquidity provisioning as a last resort, but this role will be limited due to the SRF’s size both during the transitionary period and after the target level is reached, even when we add the Common Backstop. Addressing this issue will materially enhance financial stability. Let’s hope for progress on this soon.
Another area I have mentioned many time before, is that of the need for harmonised insolvency regimes. At present with 19 different insolvency regimes, we have different counterfactuals to resolution across the member states and perhaps even worse there is no harmonised answer as to how to deal with banks for which resolution is not the solution. Here a harmonised administrative insolvency regime, perhaps something similar to the FDIC system, is the way forward.
We are also hoping for the establishment of a deposit insurance scheme at EU level. Again, this is another issue that has been on the boil for some time - its time to rethink and complete it!
Talking of completing unions – the creation and completion of a fully functioning Capital Markets Union will allow capital to flow from one member state into another, without difficulty. We know it is on the agenda of the new Commission and we clearly see the benefits for the build up of MREL. I also welcome Commissioner Dombrovskis’ commitment to the Capital Markets Union earlier this week in his European Parliament hearing, and I was pleased he received the support of the Committee to continue in his role as Commissioner.
The Panels
We are going to look in more detail at the progress that is being made in resolution in Panel One this morning. Later in Panel Two, we’ll examine the issue of liquidity in resolution, which is of course a very important area for resolvability. Panel Three this afternoon will discuss the issues surrounding operational continuity. Melinda will introduce the panels in more detail later on this morning.
Conclusion
Ladies and gentlemen, I won’t say much more than that - we have a wonderful line-up of speakers today, with a great mix of heavyweights from both industry and the public sector.
I hope you will find today’s event useful not only for the ideas you will be exposed to, but I hope it will be a valuable networking opportunity to engage with those involved in resolution in Europe and further afield. I have said it often before, but it’s worth stressing once again – we rely on the cooperation of all parties involved, national authorities and banks foremost, in order to ensure we achieve resolvability.
So with that, I now declare the conference open, and handover the floor to a woman needing little introduction.
She has been a stand-out commissioner in the last Commission, and given her stellar performance at the European Parliament on Tuesday, I am sure she will be equally impressive in the Von der Leyon Commission.
It give me great pleasure to introduce to you the current Competition Commissioner, and the Executive Vice President-designate - Europe fit for the Digital Age, Margrethe Vestager
[1] Exchange of letters on Cooperation in the area of banking resolution between the Single Resolution Board and the Financial Services Agency
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