The European Court of Auditors has deemed appropriate the financial provisioning made by the Single Resolution Board (SRB) for the 2021 financial year to address the legal risks of resolving failing banks within the euro area banking union, in a report published on Wednesday 30 November.
In particular, the Court found no evidence to contradict the SRB’s decision not to make any budgetary provision in the event of a conviction at European level in cases concerning its decisions to resolve a bank.
The rejection by the EU General Court in June 2022 of five appeals against the resolution of the Spanish bank Banco Popular is likely to reinforce the European authority’s position (see EUROPE 12963/22).
For the corresponding cases before national courts, the SRB has indicated the nature of the potential liabilities associated with these disputes, but it cannot quantify the potential financial effect, the European auditors found. They recommend that the Commission ask Member States’ resolution authorities to provide it with written statements on ongoing national proceedings, of which there are still almost 1,000 in Spain in the Banco Popular case.
It should be noted that the resolution in March of Sberbank’s institutions located in the banking union (see EUROPE 12902/2), contested by the Russian bank, constitutes a financial risk for the future.
The European authority is also responsible for collecting ex ante the annual contributions from the banking industry to the Single Resolution Fund (SRF), the financial arm of the resolution component of the banking union. More than sixty cases are pending at European level, with many banks challenging the methodology used.
Based on European case law, the SRB has developed a new calculation method to better reflect the financial risk arising from these proceedings. It mentions €5.5 million in commitments related to potential repayments of the SRF Fund, and €2.55 million in commitments linked to potential compensation for legal costs.
See the European Court of Auditors’ report: https://aeur.eu/f/4d3 (Original version in French by Mathieu Bion)