The Single Resolution Board (SRB), the European authority responsible for resolving large failing banks in the euro area Banking Union, has established sufficient budgetary provisions to deal with the financial risks incurred in the legal disputes in which it is involved, the European Court of Auditors said in a report published on Monday 30 November.
Through the competent national authorities, the SRB collects ex ante contributions from the banking industry to finance the Single Resolution Fund (SRF), the armed wing of the ‘resolution’ arm of the Banking Union. By June 2020, 23 appeals had been lodged at EU level against decisions on these ex ante contributions and many more at Member State level challenging national procedures for the notification of ex ante contributions .
On this issue, the Single Resolution Board made provisions of €186 million related to appeals at EU level and €1,861 million related to appeals at national level.
“We conclude that the SRB made a fair effort to assess the risk per case and to disclose related contingent liabilities”, says the European Court of Auditors. It notes, however, that a judgment of the General Court of the EU of September 2020 (Cases T-411/17, T-414/17, T-420/17), which is not yet final, “found that the legal framework for ex ante contributions was to be partially unlawful” because of the opacity of the methodology for calculating the ex ante contribution to the SRF enshrined in the delegated regulation 2015/63. Consequently, the EU auditors consider that “the SRB was not in a position to sufficiently reason its decision”.
Banco Popular. Most cases at EU level are related to the 2017 resolution of Banco Popular Español in which the SRF was not committed and the SRB refused to compensate the shareholders of the bank resolved (see EUROPE 12449/24).
For these cases, the European authority decided not to compensate, considering that the corresponding risk was low.
“We note that the assessment of legal cases is inherently subjective, as it is based on expert judgment. Additionally, it is difficult to predict the outcome of these legal proceedings at this stage, as there is no related case law. However, we found no evidence that would contradict the SRB’s assessment”, concludes the European Court of Auditors.
See the report: https://bit.ly/36i9uQC (Original version in French by Mathieu Bion)