SRB Response to EU Banking Competitiveness Consultation: Resolution Framework Meets the Growth Agenda

ByOfficer

Last updated: April 2026

The European Commission asked how to make EU banking more competitive. The Single Resolution Board answered by pointing straight at the gaps in the Banking Union. On 15 April 2026, the SRB published its response to the Commission’s targeted consultation on the competitiveness of the EU banking sector, and the message is clear: resilience and competitiveness are not opposites, but the current framework is too fragmented and too complex to deliver on either objective fully.

For reporting teams and resolution planners, this matters because every proposal the SRB makes here, from streamlined MREL calibration to a European liquidity backstop, would change what institutions report, how they structure eligible liabilities, and what their capital stacks look like. The consultation deadline was 19 April 2026. Responses will feed the Commission’s planned 2026 report on banking sector competitiveness, itself part of the Savings and Investment Union (SIU) strategy launched on 19 March 2025.

Related reading: MREL Reporting Requirements

What the Commission Asked

The targeted consultation covers 95 questions across three pillars: banking competitiveness in the EU and globally, the single market and the Banking Union, and complexity and effectiveness of the regulatory framework. The SRB chose not to answer every question. It focused on areas within its mandate: resolution planning, MREL, deposit insurance, liquidity in resolution, and cross-border group treatment.

That selective approach is itself informative. The SRB stayed away from prudential supervision, macroprudential buffers, and digitalisation, leaving those to the ECB, EBA, and national authorities. Where it did respond, the answers were detailed and often blunt. On MREL complexity, the SRB rated the resolution requirements as “somewhat high.” On the prior permission regime for eligible liabilities, it recommended replacing the current blanket approval system with a risk-based approach.

Teams that expected a cautious institutional statement got something more useful: a roadmap of where the SRB itself sees the framework as over-engineered.

MREL Simplification: The Central Thread

MREL runs through nearly every section of the SRB’s response. The Board acknowledges what practitioners already know: the MREL framework is complex. Multiple target types (total MREL, subordinated MREL, TLAC, internal MREL), each expressed in both risk-weighted assets and total exposures, with different buffer regimes attached. The SRB’s own words: “The result is a very complex regime, with many types of targets… each in terms of risk weighted assets (TREA) and total exposure (TEM), and with different buffer regimes.”

The SRB proposes a restructured calibration. Step 1 would become more standardised, reflecting non-disputable elements as the SRB terms them: Pillar 1, Pillar 2 requirements, and the resolution strategy and tool. Step 2 would preserve resolution authority discretion, but only as an add-on where resolvability or crisis readiness is insufficient. This is a significant shift from the current approach where multiple discretionary layers interact across the calibration.

What This Does Not Mean

Simplification does not mean lower targets. The SRB was explicit: any recalibration of MREL must be a consequence of broader capital framework reform, not a standalone reduction. The “Monday morning” test still applies. A resolved bank must exit resolution with enough capital to meet supervisory expectations and maintain market confidence. Teams that read “simplification” as “lower requirements” will misread this response entirely.

The SRB also flagged the 8% TLOF threshold for SRF access as a source of rigidity unique to the EU. Other jurisdictions do not have an equivalent condition. The recent CMDI reform, published in the Official Journal on 20 April 2026 (Directive (EU) 2026/806 amending the BRRD, Regulation (EU) 2026/808 amending the SRMR, and Directive (EU) 2026/804 amending the DGSD), expands the possibility for DGS to support resolution sales of smaller banks and for that support to count toward the 8% threshold. But the SRB notes this comes with more conditionality than comparable arrangements in other jurisdictions, like the UK’s Recapitalisation Act.

Prior Permission: 150 Requests, Zero Concerns

The SRB received around 150 prior permission requests in 2025 for redemption of eligible liabilities under Article 77(2) CRR. None raised significant resolvability concerns. That statistic alone tells you the current regime is not proportionate. The SRB recommends shifting to a model closer to the FSB’s TLAC term sheet: prior approval required only when the bank is in shortfall, when the operation could create a shortfall on MREL or Combined Buffer Requirement, or when the bank does not meet own funds requirements. For instruments with less than one year of residual maturity, approval would only be needed during an existing shortfall.

I have seen the prior permission process absorb weeks of back-and-forth between treasury teams and resolution units for routine bond redemptions where the bank was well above its MREL target. The SRB’s own data confirms this is largely administrative friction, not risk management.

Liquidity in Resolution: The Missing Piece

The SRB calls the absence of a credible European mechanism for providing liquidity in resolution “a key missing piece of our crisis management framework.” This is not new language from the SRB, but saying it directly in a competitiveness consultation response elevates the political signal.

The current framework limits liquidity support to the Single Resolution Fund (EUR 81 billion) until the ESM Common Backstop is ratified. The SRB pointed out that the liquidity needs of Credit Suisse alone would have exceeded the SRF’s capacity, even with the ESM backstop. Without a formal mechanism, liquidity in resolution falls back to Emergency Liquidity Assistance (ELA) or government guarantees, both of which recreate the bank-sovereign loop the Banking Union was designed to break.

The SRB’s proposal: a European solution built on the SRF, with the ESM backstop, where any costs are ultimately borne by the banking sector through ex-post contributions. The mechanism needs to be formally transparent, predictable, and of credible size to cover G-SIB-level crises.

Why This Matters for Reporting Teams

If a liquidity-in-resolution framework materialises, it will come with eligibility criteria, collateral requirements, and reporting obligations. Banks already report funding-in-resolution data to the SRB as part of resolution planning. A formal mechanism would likely standardise and expand those requirements. The SRB notes it has been working with banks to “estimate ex-ante liquidity needs, strengthen reporting capabilities, to identify and mobilise collateral.” Those capabilities will become formal obligations if the framework gets legislative backing.

Deposit Insurance: Completing the Third Pillar

The SRB advocates for a European deposit protection framework covering all Banking Union banks. Not just cross-border banks, not just SSM-supervised banks, but all banks. The rationale: partial or optional schemes create uneven protection and undermine confidence. If large banks join an EU-wide mechanism and stop contributing to national safety nets, smaller banks relying on those national DGS would face a funding gap.

The response goes further than previous SRB positions. It calls for the deposit protection fund to not only provide liquidity support to national DGS but to absorb losses as well, subject to conditions and safeguards. This would effectively replace national DGS rather than just backstop them.

The Cross-Border Deposit Reality

The SRB makes a point that gets overlooked in the institutional debate: retail banking is no longer purely domestic. Neobanks, cross-border platforms, and digital distribution channels mean households increasingly hold deposits in other Member States. Purely national DGS protection was designed for a world where depositors banked locally. That world is shrinking.

Teams working on DGS reporting and contributions should watch this closely. A shift to European-level deposit insurance would restructure contribution calculations, change the payout mechanics, and likely introduce new reporting requirements for cross-border deposit exposures.

Cross-Border Groups: Internal MREL and Intra-Group Support

The SRB’s position on cross-border group treatment is the most technically detailed section of the response. The core problem: subsidiary-based group structures require internal MREL (iMREL) pre-positioning, which locks capital at the subsidiary level. Branch structures do not have standalone MREL requirements. According to the SRB’s H1 2025 MREL dashboard, the average internal MREL target stands at 21.9% of risk-weighted assets, with the total reference (target plus Combined Buffer Requirement) at 25.4%.

The SRB introduces the FSB concept of unallocated Total Loss-Absorbing Capacity (uTLAC) into the EU debate: external loss-absorbing capacity issued by the parent minus the loss-absorbing capacity needed to cover the parent’s solo balance sheet and its subsidiaries. These unallocated resources could be deployed flexibly to address capital shortfalls wherever they arise in the group.

Enhanced Intra-Group Support Arrangements

The SRB suggests legislators explore legally enforceable intra-group support arrangements with strict trigger criteria, linked to both solvency and liquidity of parent and subsidiary. These arrangements would benefit from resolution-specific exemptions from national corporate, insolvency, and tax rules. If implemented, they could be associated with greater discretion to reduce or waive iMREL, capital, or liquidity requirements at subsidiary level.

This is where it gets practical for cross-border groups. An enforceable support mechanism with resolution-specific legal protection would change how groups structure their internal capital allocation. I have worked with groups where the iMREL pre-positioning at a small subsidiary in a non-home Member State consumes more treasury management effort than the subsidiary’s actual business warrants. The SRB is acknowledging that this burden exists while trying to preserve the creditor-protection logic behind iMREL.

The catch: national insolvency regimes remain unharmonised. The SRB flags this repeatedly. The public interest assessment, the no-creditor-worse-off valuation, and intra-group support all depend on national rules that differ across the Banking Union. Until those are harmonised, cross-border simplification has a ceiling.

Capital Stack Interactions: The Overlap Problem

The SRB cited its own working paper showing that, on aggregate, buffer usability is limited for SRB banks. The cause: parallel application of prudential and resolution minimum requirements, combined with diverging rules on how CET1 counts toward Combined Buffer Requirement compliance across risk-weighted and non-risk-weighted frameworks.

The SRB’s November 2025 blog post on capital stacks laid the groundwork for this position. The response to the consultation reiterates it: the prudential, resolution, and macroprudential frameworks developed in parallel, each targeting distinct objectives. Changes to one layer risk undermining the others. The SRB recommends a two-part MREL structure (one standardised, one discretionary) and supports the ECB’s recommendation to streamline macroprudential buffers.

For institutions managing their capital planning, the takeaway is that the SRB does not support piecemeal reform. If MREL changes, it will be because the underlying prudential framework changes first. Planning for resolution capital in isolation from Pillar 1 and Pillar 2 reforms is the wrong approach.

Proportionality for Smaller Banks

The numbers are striking. Of approximately 1,900 Less Significant Institutions (LSIs), about 97% are earmarked for liquidation. Those liquidation LSIs face no MREL above capital requirements and no resolvability expectations. Of that 97%, a further 97% are subject to simplified obligations (SO), meaning less frequent resolution planning and reporting.

The SRB still sees room for improvement. It suggests raising the quantitative threshold under Commission Delegated Regulation (EU) 2019/348 so more banks in smaller Member States become eligible for simplified obligations. It also proposes enabling eligibility based on NRA qualitative assessments using country-specific indicators, and further reducing the frequency of resolution plan updates for SO banks.

Category Overload

One of the more candid observations: the current framework has too many overlapping categories. A bank can be subject to simplified obligations and a loss-absorption-amount add-on simultaneously because Article 12d(2a) SRMR uses different thresholds than Article 11 SRMR. A bank can be an Other Systemically Important Institution and subject to simplified obligations at the same time because the macroprudential and resolution categorisations are misaligned. The SRB recommends reducing the number of categories across prudential, macroprudential, and resolution frameworks, with fewer national discretions.

Reporting and Disclosure: Frequency of Changes Ranks Highest

When asked what drives compliance costs in reporting, the SRB ranked two items as high impact: the frequency of changes to reporting obligations and ad hoc reporting requests from supervisory authorities. The number of data points and frequency of submission ranked lower. This aligns with what I hear from reporting teams: the problem is not the volume of data points on any given submission but the constant iteration of templates, validation rules, and taxonomy updates that forces repeated re-implementation.

The SRB did not elaborate on specific reporting reform proposals in its response to this consultation, but the EBA’s ongoing framework 4.3 work and the simplification consultation (with deadlines in May and July 2026) are the implementation channels where these concerns will translate into concrete changes.

What Happens Next

The consultation closed on 19 April 2026. The Commission will use the responses to prepare a Communication on banking sector competitiveness, part of the SIU strategy. The SRB’s response positions it as an active participant in the reform debate, not just a framework operator.

For institutions, the practical timeline is layered. The CMDI reform texts entered the Official Journal on 20 April 2026. SRMR Regulation (EU) 2026/808 enters into force on 10 May 2026 (20 days after publication) and applies, with some exceptions, from 11 May 2028. The BRRD and DGSD directives require Member State transposition within 24 months of entry into force. The liquidity-in-resolution mechanism and European deposit insurance remain at the political discussion stage with no legislative proposal yet tabled. MREL simplification depends on broader capital framework reform, which means CRR and CRD amendments in a future legislative cycle.

None of this is immediate. But all of it shapes the direction of resolution planning, MREL issuance strategy, and capital management over the next two to three years.

Frequently Asked Questions

What did the SRB’s consultation response actually cover?

The SRB focused on areas within its mandate: MREL calibration and simplification, the prior permission regime for eligible liabilities, liquidity in resolution, European deposit insurance, cross-border group treatment (including internal MREL and intra-group support), capital stack interactions, proportionality for smaller banks, and reporting cost drivers. It did not address prudential supervision, macroprudential buffers, or digitalisation.

Does the SRB want to lower MREL requirements?

No. The SRB wants to simplify how targets are calibrated, not reduce them. It proposes a more standardised first step based on Pillar 1, Pillar 2 requirements, and the resolution strategy, with discretionary add-ons only where resolvability concerns justify them. The “Monday morning” test, ensuring a resolved bank exits resolution with adequate capital, remains the binding constraint.

What is the SRB’s position on liquidity in resolution?

The SRB calls the current framework insufficient. It proposes a European mechanism built on the SRF with ESM backstop, where costs are ultimately borne by the banking sector. The mechanism would need to be large enough to handle G-SIB-level crises. Without it, the SRB argues, crisis management falls back on ELA or government guarantees that recreate the bank-sovereign loop.

Would a European deposit insurance scheme replace national DGS?

That is the SRB’s direction of travel. It advocates for full Banking Union coverage, not limited or optional participation. The fund should absorb losses, not just provide liquidity support to national DGS. The SRB acknowledges this requires conditions and safeguards, including fiscal neutrality and costs borne by the banking sector.

How would cross-border groups be affected?

The SRB suggests introducing enforceable intra-group support arrangements with resolution-specific legal protections. These could allow discretionary reductions in internal MREL, capital, or liquidity requirements at subsidiary level. The SRB also introduces the FSB concept of unallocated TLAC (uTLAC) as a flexible resource allocation mechanism for cross-border groups.

What did the SRB say about the prior permission regime?

The SRB received around 150 prior permission requests in 2025, none raising resolvability concerns. It recommends shifting to a risk-based model where prior approval is required only during shortfalls or when an operation could create a shortfall. Instruments with less than one year of residual maturity would only need approval during an existing shortfall.

When will any of this become law?

The CMDI reform (Directive (EU) 2026/806, Regulation (EU) 2026/808, Directive (EU) 2026/804) was published in the Official Journal on 20 April 2026. The SRMR Regulation applies from 11 May 2028; the directives require Member State transposition within 24 months of entry into force. MREL simplification, liquidity in resolution, and European deposit insurance are at the political discussion stage. Legislative proposals would require a new CRR/CRD/BRRD/SRMR amendment cycle.

Does this affect Luxembourg institutions specifically?

The SRB’s proposals would affect all Banking Union institutions. For Luxembourg, the cross-border group treatment proposals are particularly relevant given the concentration of subsidiary structures serving as EU hubs. Changes to iMREL treatment and intra-group support could directly affect how Luxembourg subsidiaries of international groups manage their capital allocation.

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Key Takeaways

  • The SRB published its response to the Commission’s banking competitiveness consultation on 15 April 2026, focusing on resolution framework reform as the path to competitive integration.
  • MREL simplification is the central proposal: a more standardised step-1 calibration based on Pillar 1, Pillar 2, and resolution strategy, with discretionary add-ons only where resolvability warrants them. Simplification does not mean lower targets.
  • The prior permission regime for eligible liabilities should shift to a risk-based model. The SRB processed around 150 requests in 2025 with no resolvability concerns, indicating the current blanket approval approach creates disproportionate burden.
  • The absence of a credible European liquidity-in-resolution mechanism is “a key missing piece” of the crisis management framework. The SRB proposes an SRF-based mechanism with ESM backstop, sized for G-SIB-level crises.
  • European deposit insurance should cover all Banking Union banks and absorb losses, not just provide liquidity to national DGS. Partial or optional participation creates competitive distortions.
  • Cross-border groups could benefit from enforceable intra-group support arrangements with resolution-specific legal protections, potentially reducing internal MREL requirements at subsidiary level.
  • The CMDI reform was published in the Official Journal on 20 April 2026 (Directive (EU) 2026/806, Regulation (EU) 2026/808, Directive (EU) 2026/804). Broader reforms to MREL, liquidity in resolution, and deposit insurance require a new legislative cycle.
  • Reporting cost drivers ranked by the SRB: frequency of framework changes and ad hoc supervisory data requests are the highest-impact burdens, above the number of data points or submission frequency.

Sources and References

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

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