On 30 March 2023 and on 24 March 2023, the Single Resolution Board (SRB) announced the following initiatives:

• Cooperation Arrangement between the SRB and the Malaysian Resolution Authority, that is, the Malaysia Deposit Insurance Corporation (PIDM), to enhance cross-border communication and cooperation for resolving entities with cross-border operations. The On cooperation between PIDM and SRB marks a significant step towards fulfilling their respective statutory objectives, ensuring financial stability, and maintaining confidence in the financial systems in both Malaysia and the European Union (EU). This Cooperation Agreement will also promote the exchange of best practices and expertise in resolution.; and
  
• Cooperation arrangements between the SRB with the Australian Prudential Regulation Authority (APRA), the Central Bank of the Argentine Republic – Banco Central de la República Argentina (BCRA) and the Reserve Bank of New Zealand (RBNZ). The arrangements focus on the exchange of information and cooperation related to bank resolution planning, and how that is implemented for banks with cross-border operations.

Cooperation Arrangements between resolution authorities are an important ingredient for building resolvability, especially in the case of increasing cross-border banking operations and activities.

Further information may be access through these links:

• Cooperation Arrangement between the SRB and PIDM;
  
• Cooperation Arrangement between the SRB and ARPA;
• Cooperation Arrangement between the SRB and BCRA; and
• Cooperation Arrangement between the SRB and RBNZ

On 30 March 2023, in an interview on CNBC, the Chair of the SRB, Dominique Laboureix, stated that the SRB would uphold the legal framework for absorbing losses in the case of another bank failure. This comes in light of the developments in Switzerland over the Credit Suisse case, where Additional Tier 1 (AT1) instruments were absorbed prior to Common Equity Tier 1 (CET1) instruments.

In a joint statement with the European Central Bank (ECB) Banking Supervision and the European Banking Authority (EBA), the SRB said on March 20 that the “common equity instruments are the first ones to absorb losses, and only after their full use would AT1 be required to be written down.”

The standard hierarchy or framework sees equity investments classed as secondary to bonds when a bank is rescued.

On 23 March 2023, the SRB announced the 2023 administrative contributions cycle. In line with the 2022 cycle, individual annual contributions will be calculated and raised in Q3. In order to pre-finance its expenditures for the part of the financial year preceding the point at which the 2023 annual individual contributions are raised, the Board will raise advance instalments on the individual annual contributions in Q1 (only from the institutions under the SRB’s direct remit).

The 2023 individual annual contributions will be calculated and raised in Q3. Institutions will be contacted in the course of May with more detailed information on the process.

The 2023 advance instalments on administrative contributions are as follows:

• Institutions were consulted on the preliminary determinations of the advance instalments between 9 January and 20 January 2023. A total of 9 institutions submitted comments;
  
• The individual Contribution Notices were issued on 15 February 2023. The deadline for payment is 22 March 2023;
• 112 entities and groups have been notified about their 2023 advance instalments;
• The total amount of 2023 advance instalments to be raised is equal to EUR 60 million.

Further information and FAQs may be accessed through this link.

On 27 February 2023, the SRB issued the MREL dashboards for Quarter 3 of 2022.           

The minimum requirement for own funds and eligible liabilities (MREL) dashboards are based on bank data reported to the SRB and cover entities under the SRB’s remit. The first section of the dashboard focuses on the evolution of MREL targets for resolution entities and non-resolution entities2, the level and the quality of stock of MREL instruments and shortfalls in Q2.2022. The second section highlights recent developments in the cost of funding and provides an overview of gross issuances of MREL instruments in Q2.20223. 

In Q2.2022, banks reported a reduction of the MREL shortfall including the Combined Buffer Requirement (CBR) against final (2024) targets for both resolution and nonresolution entities. As for MREL gross issuances reported during the quarter, their level decreased compared to the previous quarter while remaining broadly in line with the level of the same quarter last year.

The main data issued under this MREL dashboards include the following:

MREL monitoring Q3.2022

• MREL targets for resolution entities
• MREL stock of resolution entities
• Shortfalls of resolution entities
• MREL targets and shortfalls of non-resolution entities

Market activity and cost of funding

• Market access and MREL issuances
  
• Cost of Funding

Methodological annex

• MREL monitoring
  
• Market activity and cost of funding
• Confidential criteria

Figure 1 - MREL final targets (of which subordination) for resolution entities

Key findings:

• For resolution entities, the average MREL final target (including the CBR), to be respected by 1 January 2024, was equal to 26.4% of the Total Risk Exposure Amount (TREA), remaining broadly stable compared to Q2.2022.
  
• The MREL shortfall (including the CBR) with respect to the final targets continued to decline, albeit at a slower pace, reaching the value of EUR 30.5 bn (corresponding to 0.4% TREA).
• For non-resolution entities, the MREL shortfall against the final targets (including the CBR) rose over the quarter, amounting to EUR 20.9 bn (corresponding to 0.9% TREA).
• The maturity profile of the MREL instruments showed that around 39% of the stock was made of instruments with residual maturities between two and 10 years, while the share of short-term MREL debt (maturing between one and two years) remained low, equal to about 7% of the total.
• Overall, SRB banks issued EUR 75 bn of MREL-eligible instruments, a higher level compared to the previous quarter as well as year-on-year.
• In the final months of the year, market conditions improved significantly and investors’ demand in unsecured primary markets was strong. At the end of September, funding costs reached the highest levels since the beginning of 2022, but decreased throughout the last quarter of the year, reaching in December the lowest levels since mid-August. However, they were higher than pre-pandemic levels of the beginning of February 2020.

The MREL dashboard for Q3 2022 may be accessed through this link.

The International Swaps and Derivatives Association (ISDA) has developed an InfoHub on Recovery and Resolution. This page will be updated as relevant information becomes available globally and will serve as the central repository for information from ISDA relating to the global recovery and resolution landscape.

This page is split into five main areas, as follows:

• Background
  
• Special Resolution Regimes
• ISDA Documentation
• Legislation
• Insurance Recovery and Resolution

More information may be accessed through this link.

On 13 February 2023, the EBA published its final Guidelines to resolution authorities on the publication of the write-down and conversion and bail-in exchange mechanic. Transparency and predictability are key both to the credibility of the resolution framework and to the safeguard of investors’ protection. These Guidelines aim at ensuring that a minimum level of harmonised information on how authorities would effectively execute the write down and conversion of capital instruments and the use of the bail-in tool (“exchange mechanic”) is made public.

Bail-in is the main tool available to authorities to avoid using tax-payers’ money in case of failure of a large bank. It is a complex and largely untested tool. To ensure that authorites’ approach is credible and that institutions have the necessary information to prepare, the EBA is asking authorities that have not yet done so to start publishing, from January 2024, a high-level document setting out the key aspects of their favoured approach. In particular, they are asked to specify if they intend to make use of interim instruments and to set out a timeline of the bail-in process. Those authorities that have already published information are expected to check if that publication complies with these Guidelines.​ 

Following input from the consultation, the document to be published by authorities will also include (i) clear description of potential interim instrument, (ii) further details for the timeline and (iii) where available, indicative templates or the main features of the legal instruments to be used to formally implement bail-in. 

The Guidance to resolution authorities on the publication of the write-down and conversion and bail-in exchange mechanic may be accessed through this link.

On January 2023, the Association for Financial Markets in Europe (AFME) published its statements on the negative impacts of extending the moratorium tool in resolution.