BRRD: Demand grows for better, faster liquidity in resolution
Demands for unlimited liquidity for European banks in difficulty betray regulatory nervousness over the risk of a future Banco Popular-style bank run.
Liquidity, liquidity, liquidity.
That was the recurring theme of discussions at a Single Resolution Board (SRB) meeting on bank resolvability in Brussels on October 15.
“Liquidity is not well covered by the regulatory framework. This is the missing element,” admitted Dominique Laboureix, member of the board and director of resolution planning and decisions at the SRB.
“This is well recognised now by all stakeholders. It is not enough to work on private sources of funding. We need a solution with some support from those that are able to provide liquidity to finalise decisions that we can make at SRB level: the central banks.”
It is clear, two and a half years after the implementation of the Bank Resolution and Recovery Directive (BRRD) in January 2016 that there is still an awful lot of work to be done to make the regulation achieve its aims.
“Banks are now more resolvable, but are they resolvable? We are somewhere in the middle of the process; there is still work to be done,” agreed Ignazio Angeloni, member of the supervisory board at the European Central Bank. “In order to have resolution, banks need good preparation, good legislation and appropriate funding.