The European Union’s bank-dismantling committee said on Wednesday that it will increase pressure on institutions in the coming months to strengthen their defenses so that none remain “too big to fail” by January 2024.
In its first “heat map” on efforts in avoiding failing banks from requiring taxpayer bailouts, the Single Resolution Board (SRB) reported that the gap in special debt issuance by banks to restore burnt-out capital was down to 32.6 billion euros, or 0.45 percent of overall risk exposure.
Along with Bulgaria and Croatia, the SRB is the primary resolution authority for banks in the eurozone’s 19 member countries.
While most banks have fulfilled their aim for providing MREL, the SRB said that certain lenders still need to enhance other areas that enable a seamless “resolution” or winding down if they fail.
“We have seen good progress by all banks, spearheaded by the largest banks. At the same time, we also see clearly the areas that require further attention in 2022 and 2023,” SRB Chair Elke Koenig said in a statement.
The SRB said that all banks must make progress in quickly mobilizing cash and collateral during resolution, as well as enhancing banks’ capacity to reorganize and separate their activities following a failure so that vital services may continue under a new owner.
Over the next year, the watchdog will focus on additional testing and resolution “dry runs” at lagging banks in order to narrow their “capability gaps.”
Last month, the Bank of England said that it was confident that major British lenders had taken efforts to guarantee that they were no longer “too big to fail” in the event of a new crisis. more info
“We do not believe that the failure of these institutions would now onwards require public money, and that, to me, is the critical plank of the too-big-to-fail policy,” Bank of England Governor Andrew Bailey said in a statement to Britain’s parliament on Monday.