The Single Resolution Fund (SRF), the financial arm of Banking Union, stood at €24,8 billion on 30 June 2018, according to data released by the Single Resolution Board (SRB) on Tuesday 24 July.
By 2024, the size of the SRF should reach at least 1% of the deposits covered. Although at its origin, a target of €55 billion was mentioned, the SRF is now expected to reach between €63 and €67 billion, according to sources at the SRB.
This increase is due to a substantial increase in the level of bank deposits since the 2008 financial crisis. By way of comparison, the sums collected ex ante from covered banks have risen by13% in 2018 on 2017.
Of the 3,315 financial institutions contributing to the fund, 1,516 have their headquarters in Germany, 531 in Austria and 452 in Italy. Banks contribute to the SRF in terms of the total assets they generate and their risk exposure. A new aspect was introduced for 2018: the calculation methodology for individual contributions incorporates the 'liquidity coverage ratio' (or LCR) as a criterion to be taken into account.
Unsurprisingly, the amounts collected come mainly from national bank sectors. Of the total of €7.5 billion collected in 2018, the French banking sector provided €2.3 billion and the German sector nearly €2 billion, followed by Italy’s bank sector (€827 million) and Spain's (€735 million).
Backstop. By the end of this year, the Single Resolution Board will negotiate with eurozone nations the details of the backstop to be provided to the SRF by the European Stability Mechanism (ESM), the eurozone’s permanent bailout fund. According to a number of SRB experts, the ESM could provide a credit facility, a revolving credit facility or a loan. The nature of the backstop would not be linked to its size.
Other modalities remain to be decided, such as the scale of the backstop which, according to Paris and Berlin, should be just below the size of the SRF. The backstop’s activation date and decision-making details also need to be set and Germany is insisting that the Bundestag should keep its right to scrutinise how the fund is used.
At the European Parliament in mid-July, the chair of the SRB, Elke König, stressed the impossibility of adding new bank resolution-related conditions to the activation of the backstop. She said that in the event of failure of a bank, these conditional criteria would be examined once and for all when the SRF is mobilised. (Original version in French by Mathieu Bion)