For 2022, the SRB, Commission and Council reported no contingent liabilities for the resolution of failing banks in the euro area; The SRB disclosed contingent liabilities related to banks’ contribution to the Single Resolution Fund (SRF) totalling €1 892 million, up from €8 million in 2021
Financial risks to the EU’s single resolution mechanism, which is used for managing the orderly winding-up of failing banks, are scrutinised each year by the European Court of Auditors. In a report released today, the auditors found no evidence to suggest that contingent liabilities by the SRB, Commission and Council arising from their bank resolution tasks were misstated in any material way in their 2022 accounts.
The SRB plays a key role in the EU’s banking resolution system. It oversees the SRF, an emergency fund that can be used in times of crisis to resolve failing banks in the 21 Banking Union countries. Contributions to the fund are paid by Banking Union banks over an initial period of eight years ending in 2023, with the aim of reaching a final target level (estimated by the SRB in 2022 to be around €80 billion). The Commission and the Council of the EU may also be involved in decisions on winding up a failing bank. When they disclose contingent liabilities in their accounts, these bodies consider there to be a risk that they may need to make future pay-outs because of ongoing legal proceedings against their resolution or non-resolution decisions, or in relation to the protection of creditors, or bank contributions to the SRF (the latter applies only to the SRB).
In June 2023, when the 2022 accounts of the three bodies were closed, various legal proceedings before EU and national courts were underway against their resolution or non-resolution decisions, including the SRB’s decision on whether compensation for shareholders and creditors should be granted in certain cases. The SRB, the Commission and the Council did not report contingent liabilities for 2022 in this regard. This was because they assessed that there was only a remote likelihood of litigation having a negative outcome for them, or because the SRB was not in a position to quantify the possible financial effect for cases contested at national level.
At the same time, a number of legal proceedings against the SRB were pending before EU and national courts regarding the banks’ ex ante contributions to the SRF. Mainly as a result of the new legal pleas brought before the EU courts in 2022, the SRB’s contingent liabilities reached €1 891.6 million in 2022, up from €8.1 million in 2021. Most of the pleas are linked to several banks which have questioned the fund’s annual target level for the amount to be collected in 2022 in order to reach the SRF’s estimated final target level. In particular, they challenged the SRB’s decision to call up an amount of around €14 billion for 2022....
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