Milan: Europe’s crisis planners have decided that being ready to wind down a failing lender should not require quite so much paperwork, and this month they started proving it.
From the first of July, the Single Resolution Board applies a faster procedure for approving early redemptions of the special debt instruments banks hold as a shock absorber. Where lenders once waited on a slow authorisation, they now get an answer within a month. The change is modest on paper, but it signals a broader shift in how the authority approaches bank resolution after a decade of building the machinery.
Those shock absorbers go by an ungainly acronym, MREL, the minimum requirement for own funds and eligible liabilities. In plain terms, each bank must hold a cushion of capital and bail-in-able debt large enough that, if the institution collapses, losses fall on its investors rather than on taxpayers. The whole point is to make the promise of never again from the last financial crisis operationally real.
The board reports that banks under its watch continue to meet their targets, a reassuring baseline as it turns to a more demanding phase. This year it begins rolling out a revamped assessment of whether a bank could actually be resolved in practice, backed by a multi-annual framework that tests firms rather than trusting their plans on paper. Officials want to know that bail-in tools and operational continuity would work on a chaotic weekend, not merely in a binder.
Simplification is the connecting thread. The authority has signalled that it wants to lighten routine burdens so that both supervisors and banks can concentrate on the scenarios that matter. It welcomed a recent Commission communication on the competitiveness of the banking sector, reading it as permission to prune requirements that add cost without adding safety.
The reasoning is not merely bureaucratic housekeeping. A banking system weighed down by duplicative reporting lends less and competes worse against rivals in the United States and Asia, where consolidation has produced larger institutions. European policymakers increasingly frame financial regulation as a competitiveness question, not just a stability one, and the resolution board is adjusting its posture accordingly.
Sceptics urge caution. Every rule the board relaxes was written after a failure that the old regime missed, and memories of taxpayer bailouts remain raw. Critics warn that a drive for lighter supervision, however well intentioned, risks eroding the buffers precisely when complacency is setting in. The board insists it is streamlining process, not lowering the bar, and that resolvability testing will keep the discipline intact.
The proof will come only in a crisis nobody wants. Until then, the authority is betting that a leaner, better-tested framework leaves Europe readier to let a bank fail without dragging the public down with it. For depositors who will never read an MREL template, that is the quiet reassurance the exercise is meant to provide.
