Why and how supervision and resolution authorities should work more closely with one another Let me now turn to the way in which the two completed pillars of Banking Union, namely supervision and resolution, could become more consistent with one another and work more closely together. Cooperation between the SRB and the ECB does exist, and is formalised by a Memorandum of Understanding. This provides for ex-ante cooperation in calm times, and close cooperation in early intervention and resolution phases. Thanks to this tremendous ongoing preventive work conducted by the SSM and the SRB, and to continued efforts from banking institutions, recovery plans have significantly improved in recent years. Page 4 sur 5 Beyond the current areas of cooperation, which could still be enhanced in practice, greater coordination on policy issues appears desirable. In particular, policy decisions that pertain to own funds have a very concrete impact on European banks’ competitiveness, and therefore on the level playing field with foreign banks. Here, we must find a trade-off between safety and competition issues, with efforts needed on both sides. For instance, the SSM could further consider a risk-based approach rather than a flat-rate approach to estimate post-resolution Pillar 2 requirements. This entails a need to take into account a forward-looking approach and the expected risk reduction that follows a resolution. This should be acknowledged in the calibration of external minimum requirements for own funds and eligible liabilities (MREL): banks are not at the same stage today as they were seven years ago.
This is where we should bring our Ziel, our strategic objective, into our field of vision. And even more so since MREL requirements in the European Union are, on the whole, far more stringent than the TLAC international standards and their translation into other jurisdictions’ regulations. * ** Let me conclude by saying that, in 2022, after the first seven years of existence of the single resolution mechanism, it may be time to recall what Clausewitz rightly identified as the greatest difficulty: “to adhere steadfastly in execution to the principles which we have adopted.” That does not mean showing rigidity in technical implementation, on the contrary. It means taking a risk-based approach and conducting a balanced analysis of the best way forward in order to serve these principles in a relevant way. I will end my speech with another phrase of Roman wisdom: in medio stat virtus, virtue lies in the middle. I thank you for your attention.