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The SRB had a difficult start in 2015-16 and has not yet completed its initial build-up, as attested by still-unfinished work on resolution planning and MREL-setting. But it has displayed an ability to learn and adapt, and has considerably gained in stature following its first decisions on individual cases of unviable banks in 2017 and 2018.
Evidently, the SRB’s future cannot be separated from that of Europe’s banking union and of its broader unviable bank regime. As analysed in Section 2 of this study, the two are related but distinct: the BRRD was proposed before banking union started. But they are interrelated, and both are still works in progress. Completing the banking union entails breaking the bank-sovereign vicious circle, which in turn requires reducing concentrated home-country sovereign exposures in banks’ balance sheets, creating an EDIS that insures all euro-area deposits identically, and removing the current obstacles to the free allocation of capital and liquidity by banking groups across intra-euro-area borders. Meanwhile, the dependence of the unviable bank regime on divergent national insolvency proceedings, with a lower observed occurrence of BRRD resolution than might have been the legislators’ intent, could lead to an in-depth reconsideration. And to the extent that the current regime leaves ample scope for expending national public financial resources in future unviable bank cases, it also contributes to perpetuating the bank-sovereign vicious circle.
In the meantime, the SRB should continue to build up its capabilities, and keep a sense of urgency about fulfilling the full extent of its mandate so that it is not caught unprepared in the event of a future crisis. If the SRB is able to properly handle the next cases of unviable banks in the banking union, whatever and whenever these may be, and to use its existing authority to the extent made necessary by the circumstances, it has the potential to become a credible, globally-respected authority on a par with the US FDIC. That would be no mean achievement.