2022 SRB Banking Union Resolvability

SRB Publishes 2022 Resolvability Assessment of Banking Union Banks
The Single Resolution Board (SRB) has released its annual resolvability assessment for the year 2022, offering a comprehensive overview of the progress made by banks across the Banking Union towards achieving resolvability. This critical assessment evaluates how banks have been implementing the SRB's Expectations for Banks and building up their Minimum Requirement for own funds and Eligible Liabilities (MREL).

SRB Chair Dominique Laboureix commented on the assessment, stating, “The assessment shows that most banks have continued to make good progress: they have built-up financial resources to withstand severe financial shocks and are on track to meet their targets by the end of this year, which is a significant milestone on the road to financial stability.”

Key Findings of the 2022 Assessment
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1. Enhanced Loss-Absorbing Capacity: Banks have notably increased their MREL capacity, which is crucial for absorbing severe losses and addressing recapitalization needs. This improvement aims to shift the financial burden from taxpayers to shareholders and investors. By the end of 2022, two-thirds of the banks had met their final MREL target for 2024, including the Combined Buffer Requirement (CBR). This achievement has led to a one-third decrease in the aggregate MREL shortfall across all SRB banks compared to 2021, currently standing at just 0.3 percent of the total risk exposure amount (TREA).

2. Operational Process Development: Banks have also made strides in enhancing their operational processes and have begun testing their information systems. These advancements support the effective use of funds during a crisis.

3. Closing Remaining Gaps: By the end of 2023, banks are expected to address the primary remaining gaps, particularly concerning liquidity and funding in resolution, separability, and restructuring.

Future Outlook and SRB’s Role
Looking forward, the SRB recognizes the need for the resolvability assessment to evolve in response to the changing nature of risks that banks face. To ensure banks are adequately prepared for a variety of crisis scenarios, they will be required to provide evidence of ongoing updates to their resolvability capabilities. Regular testing of these capabilities, as per a multiannual work program, will be essential.

The SRB will play a crucial role in this process by continuing to engage with banks. This engagement aims to further operationalize resolution strategies and tools, with specific focus areas including transfer tools, liquidity in resolution, and restructuring.

Read more about SRB in article: Single Resolution Board: Embarking on a New Strategic Phase in 2024

Conclusion
The 2022 Resolvability Assessment by the SRB marks a significant step in ensuring that banks within the Banking Union are prepared for financial stability challenges. The progress made thus far is commendable, but the journey towards complete resolvability continues. With the SRB's guidance and the commitment of the banks, the Banking Union is moving closer to a more resilient and robust financial system.

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