SRB head warns against weakening banking regulation adopted after the crisis

Dominique Laboureix, president of the Single Resolution Board (SRB), has cautioned against any move to weaken the banking regulations established in the wake of the 2007 financial crisis. He argued that such actions could jeopardize the financial stability of the European Union.

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The memories (of the crisis) are fading very quickly, and nobody remembers today, or some but not much, the cost we paid in 2008 and 2009 to save the banking system, which was so necessary to finance our economies. And we should not forget it.

"The memories (of the crisis) are fading very quickly, and nobody remembers today, or some but not much, the cost we paid in 2008 and 2009 to save the banking system, which was so necessary to finance our economies. And we should not forget it," Laboureix stated during a debate with the European Parliament's Committee on Economic and Monetary Affairs. His remarks come ahead of the European Commission's expected report on the competitiveness of the European banking sector, which may propose reviewing capital requirements, adjusting international rules like Basel, and reducing reporting obligations.

Laboureix clarified that the SRB is open to making legislation simpler and more predictable, for instance, by streamlining capital reserve calculation methods. However, he stressed that this simplification should not equate to deregulation, a sentiment echoed by the European Central Bank. "We are motivated to simplify. We are not ready to deregulate," he affirmed, adding that genuine simplification that does not compromise resilience requires a holistic approach.

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We are motivated to simplify. We are not ready to deregulate.

He particularly defended the utility of the Minimum Requirement for own funds and Eligible Liabilities (MREL), a crucial EU-specific tool. MREL acts as a buffer, ensuring banks have sufficient funds to cover at least part of their resolution costs in case of difficulties, thereby preventing taxpayer-funded bailouts. Laboureix insisted that MREL is essential for banks to regain solvency after resolution and urged for its analysis in conjunction with other capital requirements, countering claims that MREL requirements are excessively high or complex. "Without sufficient MREL, resolution would fail and financial stability would not be restored," he concluded.

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Without sufficient MREL, resolution would fail and financial stability would not be restored.