The dismantling of the European subsidiaries of the Russian group Sberbank, triggered by the loss of depositor confidence after the Russian invasion of Ukraine, was a “success” for financial stability, but the experience once again shows the importance of harmonising national insolvency frameworks for financial institutions in the EU, said, on Wednesday 30 March, Elke König, the Chair of the Single Resolution Board (SRB), the European authority responsible for resolving large banking groups within the euro area banking union.
According to Ms König, the introduction of a 48-hour moratorium made it possible to smoothly divest Sberbank’s Slovenian and Croatian subsidiaries in order to maintain continuity of operations in the interest of retail customers and to dismantle the Austrian subsidiary in accordance with national rules, without recourse to financial assistance from the Single Resolution Fund (see EUROPE 12902/2).
“The case of Sberbank is further proof that the EU resolution framework works, but let us bear in mind that Sberbank was not a large EU bank by any stretch of the imagination”, Ms König stressed. In her view, the situation would be much more complex in the event of the failure of a banking group operating in many countries within the banking union, as the SRB would then be faced with “different legal frameworks simultaneously”.
“This is why I have long been calling for a harmonisation of the framework for insolvency of financial institutions. This is really important, if we are serious about being able to resolve large banks over just a few days”, continued Ms König.
The Chair of this European Authority, whose mandate expires at the end of 2022, reiterated her call for the completion of the banking union through the establishment of a European Deposit Insurance Scheme (EDIS).
Such a regime would “maintain confidence in times of crisis”, she said, noting that in the case of Sberbank, tensions had arisen in one country because investors were concerned about the safety of their deposits. “What would happen if a Deposit Guarantee Scheme is not sufficiently funded?”, she questioned.
The Eurogroup will try to reach a political agreement by June on a detailed work programme to complete the banking union (see EUROPE 12911/18).
Asked about the need to monitor other Russian banks operating in the EU that might find themselves in trouble as a result of international sanctions against Russia, Ms König did not mention any particular financial institution, just a Cypriot bank with a large Russian client base. In particular, she said, developments in bank exposures to commodity markets should be monitored.
At this stage, “we are not seeing anything deeply troubling” thanks to the increased transparency and strong capitalisation of the banking system, she said. Similarly, few banks have not kept up with the first regulatory deadline of January 2022 for the minimum required level of ‘MREL’ capital that can be readily used in the event of a bank resolution.
In addition, the SRB Chair mentioned the publication in the summer of a ‘heat map’ that will monitor, benchmark and communicate the efforts banks are making to improve their ability to withstand a resolution process in the event of a crisis. This heat map will kick off an annual reporting exercise, but unlike what is required in the UK, the data will remain at an aggregate level so as not to point fingers, Ms König said. (Original version in French by Mathieu Bion)