The Role of SRB and Resolution Framework in General. José Carlos Molina Franquelo SRB - Resolution Planning and Decisions, Head of Unit

Transcription

1 The Roe of SRB and Resoution Framework in Genera José Caros Moina Franqueo SRB - Resoution Panning and Decisions, Head of Unit

2 TABLE OF CONTENTS 1. The 2008 Financia Crisis & the Reguatory Response 2. SRB s Mission 3. Resoution Panning at a Gance 4. SRB s Achievements 5. Cooperation with the Estonian NRA 6. Questions & Answers

3 A CRISIS OF HISTORIC PROPORTIONS 2008 Coapse of Lehman Brothers Banks too big or too interconnected to fai The threat of bank faiures meant that the heath of government finances became more important than ever What started as a banking crisis became a sovereign debt crisis BANK CRISIS Banks faied in Europe Market osses EU governments came to the rescue Damage to the taxpayer Ensuing economic crisis & recession > GDP damage > Genera Unempoyment soared > Youth unempoyment rose POLICY CHALLENGES & RESPONSES Decisions to end era of impicit tax payer guarantees & bai outs Crisis prevention (reguatory & supervisory initiatives) Crisis contro and mitigation (joint strategy from poicymakers) Crisis resoution (stress test, restructuring) MARCH 2009 EU Commission endorses the de Larosière recommendations and cas on EU eaders to move fast on financia market reform and show goba eadership at G20 in Apri.

4 SRB: WHY WAS IT ESTABLISHED? To end sovereign-bank doom-oop SOVEREIGN-BANK DOOM-LOOP banks need government support G /2014 Financia stabiity Board crisis deepens government s fisca position weakens BANKING UNION & BRRD 2014 Singe Supervisory Mechanism - ECB 2015 Singe Resoution Mechanism - SRB banks baance sheets weaken refinancing costs rise; higher debt yieds European Deposit Insurance Scheme PILLAR 3

5 SRB MISSION & DIVISION OF TASKS WITHIN THE SRM The mission of the SRB is to ensure an ordery resoution of faiing banks with minimum impact on the rea economy and the pubic finances of the participating Member States of the Banking Union. Member States in the Eurozone Member States not in the Eurozone PT IE ES UK FR NL BE LU DK DE IT SE PL CS SK AT HU SI HR FI LT EE LV RO EL BG The SRB together with the Nationa Resoution Authorities (NRAs) forms the SRM. The SRB is directy responsibe for: - Significant banks - Cross-border banking groups NRAs are directy responsibe for a other banks. SRB coud take over direct responsibiity. The SRB cosey cooperates with the NRAs. MT CY

6 OBJECTIVES OF RESOLUTION & SRB S TASKS Objectives of Resoution - Goas of SRB action Ensure continuity of critica functions Maintain financia stabiity Protect pubic funds Protect depositors and investors Protect cient funds and assets RESOLUTION PLANS Each objective is of equa significance ELABORATE & ENACT RESOLUTION SCHEMES MAIN TASKS ASSESSMENT OF RESOLVABILITY & OBSTACLE REMOVAL PROTECT AND CONTROL SRF MREL

7 WHAT IS A RESOLUTION? WHAT ARE THE RESOLUTION TOOLS? RESOLUTION means the restructuring of a bank by a resoution authority through the use of resoution toos, to ensure, inter aia, the continuity of its critica functions and preservation of financia stabiity. CONDITIONS for resoution are triggered when the authorities determine that: a bank is faiing or ikey to fai; there is no other private sector intervention or supervisory action that can restore the institution back to viabiity within a reasonabe timeframe; and resoution is in the pubic interest. Different toos can be used to safeguard pubic interest, incuding the continuity of the bank s critica functions and financia stabiity, at minima costs to taxpayers. SALE OF BUSINESS Part or a of the shares or other instruments of ownership or assets, rights and iabiities can be sod to a private purchaser. Assets, rights and iabiities can be transferred to an asset management vehice, totay or partiay pubicy owned, if iquidation of the assets coud cause market disruption. ASSET SEPARATION TOOL HELP TO PROTECT MARKETS AND CITIZENS FROM FUTURE CRISES BRIDGE BANK TOOL Part or a of the shares or other instruments of ownership or assets, rights and iabiities can be transferred to a temporary entity. Equity and debt can be written down and converted, pacing the burden on sharehoders and creditors of the bank rather than on the pubic. Safeguards No Creditors Worse Off principe BAIL-IN

8 RESOLUTION PLANNING Determine MREL Determine possibiity to iquidate If not, decide on resoution strategy RESOLUTION PLANNING IS AN ONGOING PROCESS RESOLUTION PLANNING Remove obstaces Identify obstaces Singe or mutipe point-of-entry Resoution pans are to be drafted and updated at east annuay

9 SRB vs Resoution Panning phases In 2016, 3 degrees of panning: Phase-2 pans 2016 Phase-3 pans 2017 TRPs 2016 Phase-2 pans vs Panning* No Pan TRP Phase-2 Pan Phase-3 Pan No pan 2016 TRPs % 50% 51% 52% In 2016, SRB drafted 65 Phase-2 Pans, 31 TRPs and reached Joint Decisions for 6 host cases. SRB discussed preiminary informative MREL targets at consoidated eve with banks (workshops). 40% 30% 20% 10% 0% 25% 24% 25% 21% 2% 0% No Pan TRP Phase-2 Pan Phase-3 Pan * Percentages shown in graph are reative to the tota amount of Resoution Pans for each respective year

10 KEY FEATURES OF THE SRB'S MREL POLICY Art. 12 SRMR requires the Board to determine MREL for entities isted in Art 7(2) SRMR, i.e.: Entities and groups under ECB s direct supervision Cross-border groups The Commission Deegated Reguation (EU) 2016/1450 aows resoution authorities to set an appropriate transition period to reach MREL target eve Board intends to determine MREL for a major banking groups in Banking Union in 2017 MREL determination require a case-by-case anaysis and individua decisions Board wi work with banks on individua impementation pans to reach MREL target ASAP Board wi require interim targets during the transition phase Board may make decisions on quaity of a or part of the MREL Each entity within SRMR s scope is required to meet its own MREL: institutions must meet MREL at an individua eve and parent entities at a consoidated eve In 2017, Board wi focus on determining MREL at the consoidated eve of each group ony. MREL decisions for subsidiaries wi be made at a ater stage (in 2018) based on their individua characteristics and the consoidated eve set for the group and considering the possibiity of waivers.

11 SINGLE RESOLUTION FUND TARGET A singe, fuy-mutuaised fund Financed by ex ante contributions Shortfas may be financed by ex post contributions or borrowing Member States in the Eurozone Member States not in the Eurozone PT IE ES UK FR NL BE LU DK DE IT SE CS AT SI HR FI EE LV LT PL SK HU RO BG EL Funded unti 2024 to at east 1 % of covered deposits, the SRF can be used to ensure the effective appication of the resoution toos It can be used for iquidity support or for CAPITAL MEASURES If it is used for capita measures, at east 8% of the osses of the bank must have been absorbed by sharehoders & creditors of the bank first MT CY

12 SRB RESOLUTION PLANNING ACHIEVEMENTS IN 2016 Resoution panning is a muti-year process, not a product Conducted Resovabiity Assessment Process (RAP) and drafted resoution pans Conducted initia MREL assessment Hosted / Participated in Resoution Coeges and CMGs Raised contributions to the Singe Resoution Fund Decisions on resoution pans (amost finaised) First cyce of resoution pans amost finaised Other achievements Better understanding of banking groups enabes us to ask the right questions and operationaise resoution strategies Pubished Resoution Panning Manua Deveoped horizonta poicies and data coection tempates Conducted industry meetings and workshops with banks

13 SRB S COOPERATION WITH ESTONIAN NRA TWO ESTONIAN BANKS UNDER SRB s REMIT SRB IS ALSO RESPONSIBLE FOR LSI OVERSIGHT COOPERATION WITH ESTONIAN NRA HOST CASE (SNDO IS GLRA) Parent entity ocated in Sweden Host case SNDO is the GLRA SRB & Finantsinspektsioon participate in RC 1 st JD on the RP was signed in Dec 2016 In 2017 SNDO wi update pan and set 1 st MREL targets DNB/NORDEA MERGER Foowing cosey the merger between DNB/Nordea, for which the SRB wi most ikey become responsibe as of 1 January 2018.

14 KEY FOCUS & TASKS AHEAD 2017 SRB WORK PROGRAMME: 1 Ensuring resoution readiness and removing obstaces to resoution Resoution Panning Manua & Crisis Management Manua 2 Fostering Cooperation & Cross-border reationships Interna Resoution Teams (IRTs) & Resoution Coeges (RCs) 3 Operationaising the Singe Resoution Fund Tota target size of the Fund wi equa at east 1% of the covered deposits of a banks in participating Member States in 2024 Other focus points: Minimum Requirement for Own Funds and Eigibe Liabiities > that the G20 agreed on for the gobay systemic banks > MREL of not ess than 8% of tota iabiities - but on a case by case basis possiby we above wi generay be required for the argest banks in the Banking Union EDIS > A functioning European Deposit Insurance Scheme is key to fufi the objectives of the Banking Union and beyond this is needed to safeguard the trust of depositors in their banks

15 CONCLUSION The Singe Resoution Board has been created to respond to the Euro area crisis and estabishes one of the piars of the Banking Union. By avoiding bai-outs and worst-case scenarios, the SRB wi put the banking sector on a sounder footing ony then can we achieve economic growth and financia stabiity ELKE KÖNIG Chair of the Singe Resoution Board FINANCIAL STABILITY The Singe Resoution Mechanism (SRB + NRAs) enabes the ordery resoution of faiing banks. It wi minimize adverse impacts on both the rea economy and pubic finances. Resoution wi ead to greater stabiity in the banking system and support growth in the Eurozone. The Singe Resoution Mechanism wi hep to avoid future bank baiouts and pace the burden of bank faiure firmy on sharehoders and creditors, not governments and taxpayers.

16 Questions & Answers

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