The Single Resolution Board has today published the results of its annual resolvability assessment, covering the year 2023. The report takes stock of the progress made by banks in implementing the SRB’s Expectations for Banks and building up their MREL at the end of the transition phase.
Chair Dominique Laboureix said: “Banks have come a long way in addressing the SRB’s resolvability expectations, building up the required levels of financial resources to absorb losses and recapitalise, as well as developing capabilities to ensure continued operations in a crisis. These positive results at the end of the implementation phase create the right tailwind for us to move to a resolvability testing phase, where we will challenge the banks’ operational readiness.”
By the end of 2023, except for a few banks which have a longer transition period, all banks under the SRB’s remit have met their MREL requirements. For the few banks with a longer transition period, the external MREL shortfall amounts to €6bn, compared to an overall amount of €2,555bn of MREL instruments for the Banking Union. Banks have also made progress on the main outstanding gaps on the resolvability conditions, in particular those related to liquidity and funding in resolution, separability and restructuring.
Going forward, banks will need to demonstrate that their resolvability capabilities are fit to respond to any type of risks or crisis scenarios. 2024 marks a strategic shift for the SRM and banks with the launch of the SRM Vision 2028 strategy, founded on risk identification, crisis readiness and resilience.
In this context, the SRB is revisiting its resolvability assessment methodology to promote a more risk-based approach, aiming to better capture emerging risks and lessons from past crises. At the same time, the SRB is enhancing its control functions with the development of a comprehensive testing framework, which will span from 2026 to 2028, to assess whether banks’ capabilities can operate effectively in practice. The SRB will consult the industry on the new resolvability assessment methodology and testing framework.