SUERF Policy Brief The 2023 Banking Turmoil: Implementation

SUERF Policy Brief, No 1024 3 The 2023 Banking Turmoil: Implementation Lessons for Resolution Authorities With reference on the EU crisis management framework, we explore the changes that could be made in the regulation and in the implementation of the framework to improve its effectiveness in the management of a banking crisis. [...] A well-functioning DGS could indeed permit to better achieve resolution objectives by financing the transfer of a bank to another market player in the resolution process, thus facilitating the market exit of the failing bank.5 In the European Union, however, the use of DGSs in resolution (and in measures alternative to piecemeal liquidation), outside of the traditional “paybox” function, is constr. [...] Optionality and flexibility in the choice of resolution tools Another theme highlighted by the crisis is the opportunity to investigate the choice and feasibility of resolution strategies, including the bail-in tool in various scenarios, for example in liquidity crises. [...] In the UK, the subsidiary of SVB was earmarked for liquidation because deemed to have no critical functions and no impact on financial stability in case of insolvency, but the Bank of England changed its advice in the face of the potential disruptions that would have emerged in the fintech sector, and finally decided to sell SVB UK to a larger bank. [...] In the US and Swiss cases, the relevant frameworks allowed to tailor the features of the public liquidity backstop to the needs emerging in the turmoil.