On Tuesday 1 April, Dominique Laboureix, who chairs the ‘Single Resolution Board’ (SRB), the European authority responsible for resolving large failing banks within the banking union, warned against a regulatory simplification exercise that would ultimately lead to deregulation.
“We’re ready to analyse what to do to simplify our framework but not ready to deregulate, to lower the bar”, at a time of increased volatility on the markets, he told a number of journalists, including Agence Europe. And while he did not rule out a few technical “adaptations”, particularly in the light of ten years’ experience of applying the ‘BRRD’ directive governing bank resolution, he did not specify what measures might be taken.
Asked whether the ‘CMDI’ legislative package on banking crisis management, which is currently the subject of inter-institutional negotiations, might be subject to a simplification exercise, like the legislative texts on retail financial investments and on the use of financial data, Mr Laboureix pointed out that the ‘CMDI’ legislative package aims to make more flexible and broaden the range of measures that resolution authorities can take to resolve a greater number of failing banks.
“If there are too many constraints, we’ll not be able to take resolution decisions, and we’ll end up letting the banks in question fail”, he said. “Who should benefit from regulatory simplification: the banks or the competent authorities?” he asked.
The SRB manages the €80 billion Single Resolution Fund (SRF), designed to finance the resolution of a failing bank.
By combining the amounts in the SRF and a bank’s MREL assets that can be mobilised in the event of resolution, “we are in a position to deal with the vast majority of cases that we could be faced with”, said Mr Laboureix. However, he pointed out that the European authority was not sufficiently equipped to deal with “liquidity” problems during a banking resolution. The revision of the European Stability Mechanism (ESM), which is supposed to provide an additional credit line of €60 billion to the SRF, could make things easier, he pointed out, but Italy is still blocking ratification of the agreement revising the ESM.
It should also be noted that the SRB has begun its field missions aimed at concretely testing the capacity of banks to be subject to resolution. A public consultation on this issue is currently underway (see EUROPE 13601/26). (Original version in French by Mathieu Bion)