..an interesting discussion on SSM integration, I will touch upon the Banking Union’s recent achievements, SRM and SSM cooperation today and how that might look in the future. Finally, I will briefly touch upon what is missing for a complete Banking Union.
As you perhaps know, like you, I also used to work within the SSM in the past. This is why the first pillar of the Banking Union has remained very close to my heart, even if today I work for the second one. Another reason to be happy to be here with you!
Also, before I start, let me congratulate those of you who graduated yesterday!
To set the scene for what is certainly going to be an interesting discussion on SSM integration, I will touch upon the Banking Union’s recent achievements, SRM and SSM cooperation today and how that might look in the future. Finally, I will briefly touch upon what is missing for a complete Banking Union.
1. Recent achievements of the first and second pillar of the Banking Union
Let me start from the beginning.
At the inception of the Banking Union, the SSM had the daunting task of harmonising long-standing supervisory practices and cultures across its Member States. Building upon the good work in these early days, the SSM developed into a world-class supervisor.
This was in full display last year when our banks avoided the worst of the banking turmoil. The quality of the supervision was one of the key issues in the US and Switzerland. Not here!
The resolution framework and its implementation in the Banking Union were also two major brand-new steps.
When the BRRD became law, supervision, and even deposit guarantee schemes, had been in place for a long time. Resolution started from scratch in the EU, and the SRB was created to implement this new framework.
If we look at the past decade, we can see that we have made significant progress in establishing a well-functioning first and second pillars of the Banking Union. The SSM and the Single Resolution Mechanism established high standards and enhanced banks’ resilience while starting from very different positions.
From this year, I think that we can safely say that the Single Resolution Mechanism is reaching a new phase - from build-up to maturity.
First, the Single Resolution Fund, our emergency fund that can be called upon to finance a bank resolution, has reached its target value of 78 billion euro, or 1% of covered deposits. It is now fully funded and mutualised.
Second, all banks within our remit, large and small, except for a few special situations (meaning longer transition period for some banks), have reached their MREL targets, on time.
Moreover, besides their MREL buffers, under the SRB’s guidance, banks have also built important capabilities in all resolvability dimensions. This means that they are now much more resolvable, and, as a result, safer, than 10 years ago. The improvement is remarkable. However, much remains to be done, and I will return to this point later.
2. Cooperation
2.1 Cooperation to build trust
The banking crisis framework involves a number of stakeholders and authorities. When there is stress and pressure, relationships can come under strain. To make it work we have to get used to work together and have to cooperate both to prepare for crises, and deal with them should they arise.
The progress I just described would not have been possible without the close cooperation and open communication with all stakeholders, starting from the colleagues at the ECB and national authorities.
In the European Union, we know a thing or two about communication. Our system, with so many stakeholders, literally hinges on effective communication. This is especially important in times of crisis.
Within the Banking Union, we coordinate between the various authorities that compose the Single Resolution Mechanism and the Single Supervisory Mechanism at European and national levels.
Of course, the communication and coordination work does not stop there. Our relationship with the SSM is critical. Both in resolution planning (“peace time”) and in a crisis (“war time”), we strive to have, as much as possible, an open, direct and timely communication with our counterparties in Frankfurt and beyond.
We are truly successful in dealing with a crisis if, and only if, citizens feel protected by their institutions at all times. For this to happen, all authorities need to work as one. Our work should be perceived as a seamless continuum spanning from national to EU authorities. From supervision to resolution. This is how we establish trust in our system!
Let’s not forget that SSM and SRM are not silos. Progress on resolvability improves resilience of the banking system also in going concern. If you have any doubts about this, just consider how a layer of TLAC to absorb losses before depositors could have significantly mitigated the SVB bank run; depositors would have felt more protected and less inclined to withdraw massively their funds – maybe SVB would have avoided the worst.
In the same way, for example, the work on risk management or liquidity that the SSM carries out every day is absolutely critical for banks to be resolvable. ...
more at SRB
© Single Resolution Board
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article