SRB Chair Dominique Laboureix's first speech at the ECON Committee

04 March 2023

I want to see how the SRB could function and deliver better. We will undertake a strategic review this year. We will listen to, and engage with our staff, the wider SRM community as well as industry.

Let me go now to the 2 items I would like to develop today : first, the start of a new phase for the SRB; second, the topics and priorities we have to address in our work.

[1. Starting a new phase]

As you may be aware, this year, the SRB is reaching a number of key milestones.

• We have put in place resolution plans for all our banks;
• The SRF will reach its target amount at the end of this year;
• MREL continues to be built up;
• And banks are reaching the target date for the implementation of our Expectations for Banks;

The milestones we are reaching could be considered phase one of the SRB.

However, after eight years of existence, it is time for the SRB to enter into phase two.

I want to see how the SRB could function and deliver better. We will undertake a strategic review this year. We will listen to, and engage with our staff, the wider SRM community as well as industry.

Then, we will develop a new plan to take the SRB from 2024 until 2028. This will better-equip the SRB to deal with the various challenges, to ensure banks can be resolved.

While in phase one, the focus was rightly on putting resolution plans into place, in the coming years, the SRB must shift its focus to make sure that resolution plans can be put into practice effectively. So, what does this mean? 

• This means pursuing all our core tasks, obviously, but on top…
• This means testing and checking that the resolution plans actually work in realistic simulations;
• This means having on-site inspections at banks premises ;
• And this means we have to keep our eye on a whole range of topics that that could impact our work and/or banks resilience. This is my second part.

[2. Current topics of attention for the SRB]

Let me mention 6 areas.

• The first one is the economic and geopolitical situation,

Depending on its evolution, banks could not be able to issue MREL under the same conditions as before although the gap for MREL shortfalls has been steadily closing. I also note that the ECB asked banks to be vigilant on their NPLs.

• second, Basel III – this topic is not only relevant for supervisors, but also for the SRB’s work. We must remember that every time there is an increase in prudential requirements, it automatically translates into an MREL increase. I think this is something that has to be acknowledged. 
• third, CMDI. Here, I really count on your support.

In June last year, the Eurogroup called for the CMDI to “broaden the application of resolution”. I agree with this idea. However, there can be no wider application of resolution without sufficient access to funding. That is clear. Deposit Guarantee Schemes could play a key role here, together with the Single Resolution Fund. We await with keen interest to see the proposals by the Commission in the coming weeks. 

• fourth,  non-banking financial institutions or NBFI. Let me focus today on the insurance sector today. The interconnection between the insurance sector and the banking sector is sometimes strong. A European resolution regime for the insurance industry would certainly help the SRB manage a collapse of a conglomerate. I understand work is ongoing on bringing forward a set of reforms in this area and this is good news.
• fifth Digitalisation. Here, DORA makes helpful references to the resolution framework and resolution authorities. I would like to thank this Committee and its members for these inclusions. Operational resilience is definitely important in this area.

We are currently working to be ready to implement such provisions and obviously the ICT risk, including cyber, is one area which we are studying more and more.

• sixth, climate change is impacting all parts of the economy, including  banks business models. Therefore it is something the SRB has definitely to factor into its work.

[Conclusion]

I want to conclude.

After only fifty days or so, I have two first preliminary conclusions:

• The first is that the SRB is a committed organisation, with clear milestones and with staff driven by professionalism.
• The second is that the SRB has a lot on its plate. It must be able to tackle the challenges ahead and, of course, we have to deal with new pieces of legislation. Therefore, I hope that the SRB’s strategic review will give us the tools and means for an agile and fit for purpose SRB.

I know I can count on your support so we have a strong European resolution mechanism to promote financial stability and to protect the taxpayer.

 

SRB

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