On Wednesday 28 June, the Chair of the ECB’s Single Supervision Mechanism (SSM), Andrea Enria, urged MEPs to push through the ‘CMDI’ proposal to strengthen European tools for managing a banking crisis before the end of the current parliamentary term (see EUROPE 13164/7).
“We support extending the use of resolution tools to a broader spectrum of banks”, he said during a debate in the European Parliament. In his view, the Commission’s proposal to allow national deposit guarantee schemes to contribute more to resolution is a “realistic” solution.
These changes to the regulatory framework would be “aided” by harmonising the “least cost test” for assessing the least costly solution for resolving a bank, and by rationalising the hierarchy of creditors potentially mobilised in the event of bank failure through the creation of a single category including individuals, SMEs, large companies and public authorities (‘single-tier depositor preference’).
This package of measures would create a framework for the “smooth” resolution at European level of banks in difficulty, said Mr Enria, in response to a question from Luděk Niedermayer (EPP, Czech).
Mr Enria emphasised the resilience of the European banking sector in the face of the defaults seen in the spring in the United States and Switzerland, thanks to the high level of capitalisation (average CET 1 at 15.50%) imposed by European legislation. The level of non-performing bank loans remains low, even though the rise in interest rates has led to an increase in arrears.
Events in the United States have prompted the SSM Board to monitor the issue of unrealised bank losses. According to Mr Enria, the major euro area banks directly supervised by the ECB hold “€70 billion” of unrealised losses which, overall, are not significant, but “can become problematic when associated with weaknesses in banks’ asset and liability management”. Nevertheless, he added, “unlike Silicon Valley Bank, the banks we supervise do not have extreme exposures to interest rate risk or a predominant reliance on a concentrated, uninsured deposit base”.
Basel III. Finally, the President of the SSM Board welcomed the provisional European Parliament/EU Council agreement on the finalisation of the integration of ‘Basel III’ prudential standards in the EU, which will apply progressively from 2025 (see EUROPE 13210/1). He praised the provisions governing banks’ exposure to environmental, social and governance risks, the ‘fit-and-proper’ assessment of a future bank manager and the supervision of branches of third-country banking groups operating in the EU.
However, Mr Enria stressed the importance of tackling the risks inherent in European regulatory deviations from international standards. (Original version in French by Mathieu Bion)