Brussels, 21/01/2016 (Agence Europe) - The Single Resolution Fund (SRF), which has been in place since January 2016, will have “more than €10 billion” by the end of the year, according to an announcement made on Thursday 21 January by Timo Löyttyniemi, the vice-president of the Single Resolution Board (SRB), the new European authority responsible for managing the financial arm of banking union in the eurozone.
The eurozone states have until the end of January to transfer the contributions taken from the national banking industry to the SRB, to be subsequently transferred to the national compartments of the SRF fund. In the spring, the SRB board will calculate the exact contributions for 2016 of the banks in question, on the basis of data such as own funds, deposits covered and total assets. “If the SRB has not received this information by 1 February, we will use our own estimations. On 1 May, we will notify the financial institutions of what they need to pay by 30 June”, Löyttyniemi told a small group of journalists. The contributions for 2015 and 2016 will exceed the €10 billion mark.
The SRF fund will be used only as a last resort, and certainly not before a bail-in procedure has been carried out, equivalent to 8% of the liabilities of the bank in question, to pay for a resolution process of a failing bank. The annual contributions to the SRF fund, which aims to have an intervention capacity of €55 billion (1% of deposits covered) by 2024, will be gradually pooled, to the level of 40% in 2016 and 60% in 2017. In the event of resolution, the SRF fund may be used to guarantee the assets of the bank, grant a loan, purchase bank assets or compensate shareholders and creditors which have lost more than they would have under a normal insolvency procedure.
MREL. Over the course of the year 2016, the SRB board will be getting involved in putting together the resolution plans for some 40 banks selected due to their systemic importance and geographical coverage (see EUROPE 11420). “It is up to the banks to draft recovery plans, but it is up to us to create resolution plans for the banks”, said the President of the SRB board, Elke König. She went on to stress that: “planning for, and removing obstacles to, resolution is the best safeguard and most effective way to make sure that we know what to do if - hopefully never - we have to resolve the failing bank”.
Another area of the SRB board's activities will consist of establishing minimum requirements for own funds and eligible liabilities (MREL) for the bank groups directly under the supervision of the ECB and cross-border banks. These requirements will take account of the 'TLAC' standard decided upon by the countries of the G20 and will be laid down in 2016 at bank group level and in 2017 at the level of the individual entities, König explained. She said that the banks that come under the scope of authority of the SRB board will have to comply with MREL requirements of at least 8% and, in some cases, “considerably higher than that”. She went on to stress the importance of the quality of the MREL requirements. On this point, we still have a lot of work ahead of us to reconcile the obligations stemming from European legislation ('BRRD' directive) and the 'TLAC' standard, she observed. (Original version in French by Mathieu Bion)