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Single Resolution Fund: Council agrees on bank contributions

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2014-12-14 09:33

The Council reached a political agreement on an implementing regulation determining the contributions to be paid by banks to the EU’s Single Resolution Fund (SRF).

The fund will be set up under a single resolution mechanism (SRM) that is being established to ensure the orderly resolution of failing banks.

The SRF will be built up over a period of eight years to reach a target level of at least 1% of the amount of covered deposits of all credit institutions authorised in all the participating member states.

Banks will have to make annual contributions to the fund. These will be calculated on the basis of their liabilities, excluding own funds and covered deposits, and adjusted for risk.

The recently-adopted bank recovery and resolution directive (BRRD) lays down the basic rules on how to calculate the contributions of individual banks to 28 national resolution funds.

The details are included in a Commission delegated act and will also apply to the calculation of contributions to the SRF.

The delegated act specifies how to account for risk and what the relation should be between a flat contribution rate (i.e. that which all banks must pay) and a risk-adjusted rate, which will range between 0.8-1.5.

For member states participating in the banking union, the national resolution funds set up under the BRRD as of 1 January 2015 will be replaced by the SRF as of 1 January 2016.

The Commission on 21 October 2014 submitted its draft proposal for the implementing regulation together with the delegated act.

While under the BRRD, the target level of the national resolution funds is set at national level and calculated on the basis of covered deposits, under the SRM the target level of the SRF is the sum of the covered deposits of all institutions of member states participating in the banking union.

This leads to changes in the contributions banks have to pay under the SRM versus the BRRD.

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