SRB enhances crisis readiness through simulations and valuation
Slavka Eley, a Board Member of the Single Resolution Board, outlined the SRM's strategy to enhance operational crisis readiness for Banking Union banks. Speaking at the SRB conference, she detailed efforts in resolution planning, simulations, and valuation work.
Adapting to new risks and dependencies
The Single Resolution Mechanism's (SRM) Vision 2028 strategy prioritizes reinforcing crisis preparedness, building on past experiences and dry run exercises.
Resolvability, like resilience, is an iterative process requiring continuous adaptation to changing market conditions and emerging risks.
The SRB regularly refines its resolvability assessment to ensure banks' capabilities evolve with the risk environment.
Today, financial services face growing dependencies on critical technology providers, the rapid integration of AI into banking operations, and heightened cybersecurity threats.
While traditional financial crises are well-managed, authorities must now adapt tools to address new potential sources of crises, such as operational failures or technological disruptions.
Banks are therefore asked to conduct business continuity exercises, testing their ICT systems and related management processes to withstand existential crises in any form.
Three pillars of operational readiness
The SRB's operational crisis readiness is underpinned by three key pillars: comprehensive policies and procedures, robust tools, and trained personnel.
The SRB has developed ready-to-use templates, operational guidance, and 'Flashcards' covering the full crisis cycle, including bail-in execution and transfer tools, alongside strengthened governance arrangements with national authorities.
Secondly, the SRB has invested in an operational toolkit, featuring a bail-in calculator and the 'Ready for Crisis' platform for secure communication.
Thirdly, specialized crisis training, practical exercises, and expert networks foster a culture of preparedness among SRB teams.
This readiness is dynamic, requiring continuous refinement, regular evaluation, and constant adaptation to emerging threats, demanding a deep understanding of banks' individual profiles and systemic relevance.
Simulations and data: The practical test
Simulation exercises, or dry runs, are invaluable for stress-testing theoretical frameworks and resolution strategies in realistic scenarios.
These exercises, coordinated by the SRB, identify vulnerabilities and refine methodologies before a real crisis materializes, moving preparedness beyond plans into tested operational capability.
Accurate valuation capabilities are equally critical, enabling informed and timely decisions based on comprehensive assessments of assets and liabilities.
The SRB's Expectations on Valuation Capabilities aim to enhance banks' preparedness to support robust valuations, emphasizing the need for regularly updated resolution data repositories and clear valuation playbooks.
This collective endeavor requires commitment from both banks and authorities, ensuring that capabilities are truly operational for a more resilient Europe.