MBR_ISSUE 46_NOV_DEC_18_LowRes

Malta Business Review
SPECIAL FEATURE: SRB INTERVIEW
Single Resolution Board
(SRB) Chair, Elke König Interview with the Malta Business Review - By Martin Vella
Dr Elke König is Chair of the SRB, being
responsible for the management of the
organisation, the work of the Board, the
budget, all staff, and the Executive and
Plenary sessions of the Board. The General
Counsel, the Policy Coordination and International
Relations Unit, the Communications
office and the Internal Audit function
report directly to her.
She was President of the German Federal
Financial Supervisory Authority (Bundesanstalt
für Finanzdienstleistungsaufsicht
(BaFin) from 2012 until 2015. After
qualifying in business administration and
obtaining a doctorate, Dr König spent
many years working for companies in the
financial and insurance sector. From 1980
to 1990, she worked for KPMG Deutsche
Treuhandgesellschaft in Cologne, auditing
and advising insurance undertakings, from
1986 as a holder of a special statutory
authority (Prokuristin) and from 1988 as a
director and partner. From 1990 to 2002,
Dr König was a member of the senior management
of the Munich Re Group (Head of
Accounting); she then moved to Hannover
Rückversicherung AG as Chief Financial
Officer. From 2010 to the end of 2011, Dr
König was a member of the International
Accounting Standards Board (IASB) in
London. Dr König was also a representative
of the Supervisory Board of the Single
Supervisory Mechanism.
MBR: Ten (10) years after the crisis: have
banks become truly resolvable and has the
regulatory reaction been sufficient?
EK: Casting our minds back just ten years,
the insufficiency of pre-crisis regulation is
clear. The lack of an effective resolution
regime meant that authorities were not able
to manage the failures of systemics banks
effectively. In particular, the existence of
banks deemed ‘too big to fail’ meant that
ordinary people, through their governments,
were left to foot the bill when things
went wrong.
The EU now has a bank resolution regime.
This regime was implemented in the Bank
Recovery and Resolution Directive and the
Single Resolution Mechanism Regulation
(SRMR). The SRMR created a new agency in
charge of resolution, the SRB.
Our day-to-day work is to proactively ensure
that banks are resolvable, in line with the
objectives set out in European legislation.
But bank resolution is a journey, and there is
much to be done before we reach our final
goal. The reforms – those that took place
and those that are still in the legislative process
taken together - are probably sufficient
and will be effective; but implementation of
these reforms is not yet complete.
Moreover, it is not only up to the authorities
to enhance the system. Banks themselves
must adjust their procedures and perhaps
even their business models to align to the
new regulatory framework. Only working together,
can banks and the authorities make
resolvability a reality, and deliver financial
stability to Europe.
I think we should also start perceiving the
concept of “resolution”, at some point, as a
common good or in the interest of everyone
– that is for the taxpayers but as well
as contributing to financial stability instead
of being “just” an additional burden to the
industry. After all, the public, and more
particularly the markets, should respect and
reflect that the banks which are resolvable
should be better priced compared to the
ones which are not.
MBR: What has really changed, what have
we learnt and where will the world go?
EK: Avoiding the mistakes that led to the
Banking Crisis is central to our work. One
lesson we have learned from the 2008 crisis
is that banks are often global in life and
national in death. In Europe, the high level
of interdependence across Member States’
banking systems meant that a coordinated
solution was needed to manage bank failure.
In effect, the aim of the Banking Union
is to enable the authorities to manage the
failure of banks, so that even in death banks
are dealt with from a European perspective.
A core element of the regulatory response
has been the establishment of the Single
Resolution Fund, which today stands at
€24.9 billion and will be built up to 1% of
covered deposits. The taxpayer has contributed
- and will contribute - nothing to this
fund. Instead, it is entirely funded by banks.
Implementing the agreed upon Common
Backstop for the Fund is also critical. This
will give markets the confidence that resolution
will work even for large, complex banks,
and reduce stress on the financial system in
the event of a bank failure.
Beyond the backstop, it remains fundamental
to press ahead and complete the Banking
Union’s third and final pillar through the
development of the European Deposit Insurance
Scheme. For the proper functioning of
a Banking Union, there should be no difference
in the strength of protection available
to depositors in each individual Member
State, and a failure should not fall on the
national public coffers.
MBR: Within five years of the advent of
the Crisis, the policy debate across Europe
on tackling it focused on demand management
and monetary policy. Despite
German reluctance, public investment was
an important and undeniable policy goal.
But given that different countries needed
different treatments, how difficult is it to
agree on one common policy and have a
sound legislation in place?
EK: This is a question for the Co-legislators
to answer.
From the SRB’s perspective, it is worth mentioning
that the Banking Union has created a
European authority for supervision and resolution
and – of course – a single rulebook.
The direct application of the SRMR as a
regulation is an important first step. The
agreement on a Harmonised Creditor
Hierarchy will help because an aligned
creditor hierarchy across Member States
will improve market transparency, help with
the pricing of instruments and enhance the
implementation of resolution tools.
However, the SRM framework for resolution
is faced with 19 or more different insolvency
procedures. In some Member States,
insolvency proceedings are well established,
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