The Chair of the Single Resolution Board (SRB), Elke König, recalled on Monday 22 March that European regulations set the level that the Single Resolution Fund (SRF) will have to achieve when it reaches its full power at the end of 2023 at 1% of covered deposits.
When the EU legislation establishing it came into force, the total capacity of the fund was estimated at €55 million. This sum “was never a target”, she recalled, adding that the evaluations are now based on an envelope of “€70 billion, if not more”.
SRB member Jan Reinder De Carpentier estimated that contributions from the banking sector would “most certainly” increase.
The banking sector is asking that its total contribution to the SRF, the financial arm of the resolution component of the euro area banking union, be limited to €55 billion. It has also challenged the mechanism for calculating ex ante contributions to the fund, with the General Court partially ruling in its favour at the end of 2019 (see EUROPE 12379/25).
Mrs König also welcomed the fact that the European Stability Mechanism (ESM), the euro area’s permanent rescue fund, will become the ‘backstop’ of the SRF two years earlier than planned, at the beginning of 2022, provided that all euro area countries ratify the revision of the intergovernmental treaty establishing the ESM (see EUROPE 12613/4).
Recalling that the European Commission and the SRB had appealed the judgment to the EU Court of Justice, Mr De Carpentier hoped that the Court would rule within a few months, saying he was “confident” that the Court would uphold the EU legislation.
On the economic crisis caused by the Covid-19 pandemic, Mrs König said that so far the banks “have been part of the solution”. However, she predicted an increase in non-performing bank loans (NPLs) with the phasing out of Member States’ fiscal emergency measures. “We know the problem will happen”, she said, urging banks to prepare “as soon as possible” through provisioning.
Finally, when asked about the recent ‘Tercas’ Court judgment, the SRB president considered that it draws a clear line between public and private deposit guarantee schemes, “without calling EU legislation into question”. Earlier in March, the Court rejected the Commission’s appeal against a General Court judgment that measures taken by a private consortium of Italian banks to support one of its members did not constitute aid by the Italian State (see EUROPE 12669/27). (Original version in French by Mathieu Bion)