Laboureix outlines resolution policy progress and future challenges
SRB Chair Dominique Laboureix opened the SRB Economic Conference 2025, highlighting ongoing challenges in bank resolution, such as 'too big to fail' and the rapid propagation of financial stress. She stressed the importance of collaboration between policymakers, academics, and practitioners.
The enduring 'too big to fail' question
More than fifteen years after the global financial crisis and the establishment of the FSB's Key Attributes, the question of 'too big to fail' (TBTF) persists.
SRB Chair Laboureix noted that while market expectations have evolved, with creditors of large banks now assigning a higher probability to bearing losses, the journey is not complete.
She emphasized that trust in the resolution framework is built gradually through institutional design and consistent policy choices, not merely declared in legislation.
The fact that markets still attach a non-negligible probability to government support for large banks underscores that credibility is an evolving concept, constantly tested.
Laboureix expressed confidence in progress, stating, "we are getting there," but acknowledged the ongoing need for vigilance.
Crises, concentration, and rapid stress
Historical analysis shows that financial crises often lead to greater banking system concentration, with large institutions expanding their relative importance.
This raises a tension: while consolidation can reflect economic forces, policy choices might inadvertently reinforce the dominance of the largest banks.
Laboureix cautioned that addressing 'too big to fail' could paradoxically make future crises harder to manage if lenders become even bigger.
Moreover, modern financial systems facilitate rapid stress propagation due to digitalisation and instant payments, significantly shortening the window for intervention.
This demands quick and decisive liquidity provision by crisis management authorities, a critical lesson from the 2023 turmoil.
Progress, but no room for complacency
The resolution policy framework has made significant strides since the global financial crisis, fostering greater market confidence in loss-bearing for large banks.
However, the persistent 'too big to fail' perception and the accelerating pace of financial stress propagation underscore that the journey is far from complete.
Continued vigilance, robust research, and adaptive policy tools are essential to manage future crises in an evolving financial landscape.