The Chair of the Single Resolution Board (SRB), Elke König, hoped that the ongoing consultations on the issue of liquidity in a bank resolution, designed to draw lessons from the treatment of investors in the case of Banco Popular, would find answers "by the end of the year". But quality must take precedence over speed, she stressed.
More generally, the issue of liquidity in a banking resolution is "a key gap" in the existing regulatory framework, said Mrs König on Monday 22 July, during an exchange of views with the European Parliament on the activities of the European authority responsible for resolving a major failing bank within the banking union in the euro area.
"Concerted solutions that include central banks are needed" because of the limited role that the Single Resolution Fund (SRF) can play in this area, she added, citing as an example the rules in force in the United Kingdom and the United States.
Jonás Fernández (S&D, Spain) asked her why the reform of the European Stability Mechanism (ESM), which would allow the SRB to provide liquidity in the event of a bank resolution, is still not finalised. The permanent bailout fund of the euro area could, in the future, play a role as a backstop for the SRF fund (see EUROPE 12276/34).
"Member states for the time being are very reluctant to make the ESM a provider of liquidity", Mrs König simply noted.
The Chairman of the Committee on Economic and Monetary Affairs, Roberto Gualtieri (S&D, Italy), assured that MEPs would be vigilant about respecting the prerogatives of the co-legislator in order to avoid that the unanimity of the euro area countries, required to activate the ESM, would hinder the SRB in its ability to act in the event of an urgent banking resolution.
To Luis Garicano Gabilondo (Renew Europe, Spain), who asked her what the European authority could do today if it had to solve a case like Banco Popular again (see EUROPE 11953/8), Mrs König mentioned the existence of "a moratorium tool to buy us two days time".
Such a tool, which did not exist at the time of the Spanish bank's resolution, allows public authorities to preserve the critical activities of a large failing bank to avoid a banking panic.
Mrs König said that banking resolution plans were now in place for all banks within her scope of intervention.
Aurore Lalucq (S&D, France) raised the question of the difficulty of the SRB's task related to the opacity of the activities of the shadow banking system. According to Mrs König, the risks associated with the interconnection of banking activities stem more from the risk of default by a counterparty using a central clearing house than from the parallel banking system.
European-style FDIC. Finally, Mrs König called for the completion of the banking union with the establishment of a European Deposit Guarantee Scheme (EDIS). "We’d like to see this third pillar become a reality", she said. According to her, a real European deposit guarantee scheme should provide the necessary tools for bank liquidation or, at least, harmonized administrative procedures for dealing with cases of banks that have become insolvent.
"The FDIC model is one we might need to take a very close look at in Europe", she added, referring to the establishment of a "European-style FDIC". (Original version in French by Mathieu Bion)