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Today, I am officially here with you to present the Annual Report, published last month. It details the work of the SRB during 2021, and the progress made in building resolvability, in order to promote financial stability. However, I will not dwell on the report in detail, although I would be happy to answer your questions, if you have any.
Madam Chair, I want to use the time this afternoon to provide a short update on a number of topics the SRB has been working on, since I last came here in March.
I will first take a look at some past resolution cases: including the recent court case on Banco Popular, and as well as mentioning the Sberbank case, which I touched on already in March;
Second, I want to take a look the resolvability assessment 2021. This morning we published a summarised version of our first heat-map exercise and;
Third, I will reflect on the outcome of last month’s Eurogroup and my expectations for the next steps.
[BPE / Sberbank]
Honourable members, when it comes to Banco Popular, we had recent landmark rulings from the First Instance Court. Just to remind you, Banco Popular was Spain’s 6th largest bank. The SRB managed to resolve it successfully, under what was the new resolution framework. The result back in 2017?
Instead of ‘too big to fail’, we successfully resolved the bank, avoiding a bail-out. But of course, there were investors, who had taken a risk when investing, who were not happy with their losses, hence some of them took legal action against the SRB and the European Commission, and indeed also this house, the ECB and the Council.
Now, the Court, in these recent landmark judgments dismissed the appeals against the resolution decision, in their entirety. The ruling confirmed the legality of the SRB’s decision to resolve Banco Popular and of the resolution legal framework. Our actions have been fully vindicated, which is something I very much welcome. The judgment also gives clarity for future resolution cases, including that of Sberbank AG.
For Sberbank, we have published the redacted resolution decisions and are now waiting for the valuations that compare the resolution decision with the outcome of hypothetical insolvency.
I will spare you the lessons learnt, expect perhaps, that the case highlighted the need, once again, for a harmonisation of EU insolvency laws to make a European resolution decision truly European.
[Resolvability Assessment & Heatmap]
We have come a long way since 2017, and I have often spoken about the SRB’s ‘journey’ when it comes to resolution. Part of our resolution journey is taking stock of the road travelled so far, and what is still left to do, in order to reach the destination of fully resolvable banks. It is to the resolvability assessment document I turn to now.
This morning, we published the Resolvability Assessment 2021, containing a heat-map, showing aggregated information about the progress being made, and where there is still room for improvement.
I am pleased to report overall satisfactory progress, in particular in those many areas where policies have been phased-in over recent years. So, good work in many areas, which is welcome in these uncertain times.
However, we see the need for further efforts, especially in the following areas:
(i) liquidity in resolution – this is a topic to be addressed this year and probably into next year also;
(ii) management information systems, which is a never-ending, but important issue and
(iii) business reorganisation and separation plans in case of a resolution.
These gaps will have to be closed in the near term and these are 2022 and 2023 priorities.
As regards the MREL, the assessment shows that banks are overall on track meeting the 2024 deadline, despite some outliers that are monitored carefully to achieve compliance.
Regarding the preferred resolution strategy as well the decision on SPE and MPE strategies, they are a key element of our work going forward. Resolution strategies and tools must be operationalised and as I mentioned last time, more work is needed to be sure the chosen strategy can really be implemented swiftly.
Let me stop here on this, my second topic today, and say that we remain committed to ensuring banks are resolvable by 2024...
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