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Introduction
Ladies and Gentlemen,
The honour falls to me to close this year’s SRB Conference. It is encouraging to see a wide number of people attending today’s Conference, ranging from public and private bodies, European and international. This interest and cooperation is very important as we continue to work together to make the theory and policies of resolvability, a reality. I would also like to thank the press: your work, in communicating the role of the SRB – as a promoter of financial stability and as a protector of the taxpayer – is widely appreciated.
Many interesting points and ideas have been advanced and already discussed today, so I will be brief in making my concluding remarks. I will just pick up on three points:
The first is liquidity in resolution. This is an area where more work is clearly still needed in developing a robust framework. It is a key gap in the current resolution architecture. Yes, the SRF could play a role in liquidity provisioning, but this role would of course be limited due to the SRF’s size both during the transition period and even after the target level is reached. While the Common Backstop, discussed in detail by Dominique and Fernando Restoy, will cover all uses of the SRF, including liquidity in resolution, this would still not address the liquidity needs of a large bank – let me be clear about that. Of course, liquidity needs will be very different depending on the size of a bank, the assets remaining and so on.
I want to pick up on a point Sean Berrigan made in the second panel on the backstop – the larger the backstop, and the more accessible it is, the less likely it is that it will need to be used. It is seems perhaps like a paradox, but he is right.
Progress is on-going at European level to address the limitations in the current framework. Any solution is likely to envisage a key role for the Eurosystem; the final goal should be the creation of a new resolution liquidity framework for the Banking Union. In any case, it is also essential that banks prepare themselves to ensure that private sector means are used to the maximum extent before any public sector tool has to be activated. In this regard, it is crucial that banks have in place robust methodologies to estimate the liquidity and funding needs for the implementation of the resolution strategy. They must also have adequate information systems and IT tools to identify and enhance the readiness to mobilise collateral. As mentioned earlier today, the Expectations for Banks document coming later this month, will contain further information on these aspects.
The second area is harmonisation. It was addressed by Elke and by Guntram Wolff among others earlier today. The no-creditor-worse-off principle seeks to ensure that the treatment of creditors in resolution is not worse than the treatment they would have received under normal insolvency proceedings. Currently, with nineteen different insolvency frameworks in the Banking Union, the analysis of the insolvency counterfactual for a cross-border bank in resolution is a challenge, and results in diverging outcomes depending on the home country of the institution.
In addition, the ‘failing or likely to fail’ assessment is not always aligned to the criteria for liquidation at national level and may also lead to different conclusions. At present, there is a type of uncertainty and a failing bank may end up in a limbo, therefore this needs to be corrected. Indeed, if we could bridge this harmonisation gap, we might see the creation of a European bank liquidation regime. Given the differences across national insolvency regimes, an EU administrative bank liquidation regime endowed with a range of tools - for example, like those of the FDIC – and with a Deposit Guarantee Scheme able to provide financial support on a least cost basis as an alternative to the pay-out of depositors would be a much more efficient solution. Not only would this ensure centralised decision-making, but it would also allow for the application of a harmonised and effective toolbox, paving the way for a European deposit insurance. Proposals for harmonisation will inevitably encounter resistance. We only have to look to the remarks of Jean-Pierre Mustier this morning! Yet we as policy-makers know that EDIS may help decrease fragmentation in the market.
The third point that I think was very strong today was that of the need to invest in Communication. At the SRB, we have to continue to work ensure we build, coordinate and align our communication together with banks and national authorities. As Sharon Donnery pointed out eloquently earlier on, communication is crucial in a time of resolution in order to give confidence to the markets. We have the technical policies in place now, but as we turn that policy into action, putting more of a focus on communication strategies will be important. And we very much value the work of our journalists – patiently waiting for the press conference that follows - in that task.
Conclusion
Ladies and gentlemen, in the past four years we have put many of the policies of our political masters into action, and as I said at the outset, we have enjoyed very positive cooperation with our stakeholders. Although there are still more policies to be developed, we are very much in the implementation phase for the existing ones. However, we also know that we may need to fine-tune our implementation to be as effective as possible. Therefore your feedback and close contact are vital. Going forward, we want to involve our stakeholders even more, through various forms of public consultations - as we go about implementing the rules that the co-legislators have set out.
We have a duty to ensure the resolvability of all SRB banks, so that we protect the taxpayer and promote financial stability. In just four years, we have made very substantial progress, and we will continue on this path. I look forward to seeing you all next year, as in 2020 we mark five years of the SRB’s existence.
Thank you very much for your attention.
Grazie Mille!
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