U.S. markets close in 4 hours 10 minutes
  • S&P 500

    +15.59 (+0.37%)
  • Dow 30

    +41.77 (+0.13%)
  • Nasdaq

    +111.90 (+0.86%)
  • Russell 2000

    -9.79 (-0.57%)
  • Crude Oil

    -3.50 (-3.92%)
  • Gold

    -3.00 (-0.16%)
  • Silver

    -0.30 (-1.41%)

    +0.0053 (+0.51%)
  • 10-Yr Bond

    -0.0520 (-1.08%)

    +0.0075 (+0.62%)

    -0.2610 (-0.18%)
  • Bitcoin USD

    +113.64 (+0.42%)
  • CMC Crypto 200

    +0.38 (+0.06%)
  • FTSE 100

    -57.71 (-0.77%)
  • Nikkei 225

    -711.06 (-2.28%)

EU banking regulator urges readiness amid recent global banking crises

The Single Resolution Board (SRB), the European Union's banking union overseer, has underscored the necessity for heightened preparedness in response to swift financial crises. This call comes following recent banking calamities in the United States and Switzerland, where Silicon Valley Bank collapsed and UBS was compelled to acquire Credit Suisse.

To avoid a recurrence of the 2008 global financial crisis, the SRB has imposed a minimum requirement for own funds and eligible liabilities (MREL). The MREL debt can be converted or written off during a crisis to prevent banks from becoming "too big to fail". By the end of 2022, two-thirds of banks had met their final MREL targets.

Despite these efforts, a shortfall persists. The deficit equates to 0.3% of total risk exposures or €20.5 billion ($21.87 billion). As of now, €2.7 trillion have been issued, with 24 banks still not reaching their MREL targets. Out of these, 14 have been granted extensions until the end of 2024 or 2025 to fulfill their objectives.

The SRB has emphasized that banks must maintain adequate loss-absorbing resources at all times and be capable of effectively utilizing these funds during crises. The regulatory body is now shifting its focus towards ensuring that by year-end, banks can convincingly demonstrate their ability to be smoothly "resolved" – wound down, restructured, or sold without causing disruptions for customers.

The SRB is prepared to review any significant shortcomings and take necessary corrective actions if needed. It has not yet signaled any immediate need for intervention.

In light of recent instances of evaporating liquidity seen in banking crises, the SRB is closely examining banks' resolution plans. To promote consistency across banks and integrate lessons from recent crisis cases, the SRB plans to provide further guidance on the assumptions to be used.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Related Articles

EU banking regulator urges readiness amid recent global banking crises

Indonesia parliament committee approves govt's $216.3 billion 2024 budget

EU watchdog scrutinises banks' defences after SVB, Credit Suisse woes