The EU Contact Committee has published a report on the “Preparation for resolution of medium-sized and small banks in the euro area”. The report was prepared by the Contact Committee Task Force on Banking Union and is based on the findings of a parallel audit on banking resolution carried out by the SAIs of Austria, Estonia, Finland, Germany, the Netherlands, Portugal and Spain in their respective Member States. The task force was co-chaired by the SAIs of Germany and the Netherlands.
The task force found that preparation for resolution activities of medium-sized and small banks is under way, but the process and substance of resolution planning for medium-sized and small banks differ among the countries.
Key findings and recommendations:
- most of the data held by National Resolution Authorities (NRAs) on budget and staff does not distinguish between resolution activities for large banks on the one hand, and small and medium-sized banks on the other. The Contact Committee recommends that NRAs document the resources, in terms of budget and staff, allocated to resolution planning. This exercise should be done separately for large, medium-sized and small banks, as well as and other tasks;
- NRAs perceived a lack of specific guidance from the Single Resolution Board (SRB) for resolution planning related to medium-sized and small banks. Hence, they developed their own internal guidance. This may lead to diverging approaches and practices. The NRAs, together with the SRB, should therefore develop common resolution planning guidance for medium-sized and small banks in the euro area;
- due to conditions set by the SRB, internal SRB guidance for resolution planning related to medium sized and small banks could not be fully taken into account by SAIs.
Against this backdrop, the Contact Committee calls on all actors in charge at European and national level to strengthen the independent external audit of banking resolution, in particular by making sure that the SAIs have unlimited access to the information they deem relevant for their audit work.
The report is available in English on the Contact Committee’s website and has been circulated to relevant stakeholders at national and supranational level.
In January 2021, the ECA will publish a special audit report on the state of preparedness of the Single Resolution Mechanism. The ECA’s report is expected to cover the Single Resolution Board's policy framework, the preparation of resolution plans for large, medium and small banks as well as the organisational set-up of the SRM.