08 Dec 2021

How to refine the contributions to the Single Resolution Fund?

Proposal for an alternative methodology

Willem Pieter De Groen / Inna Oliinyk

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The Single Resolution Fund (SRF) needs to provide the necessary funding for resolutions, avoiding the need to bail out banks with taxpayers’ money. The SRF relies on the banks that are part of the Banking Union to collect the funds. However, the current methodology used to determine the SRF contributions is difficult to replicate, overly complex and not fully coherent with the remainder of the resolution framework and capital requirements.

This study proposes an alternative methodology that could potentially address the challenges with the current SRF contribution methodology. The alternative methodology reduces and simplifies the number of indicators used, as well as the number of contributors. Additionally, the proposed alternative methodology significantly reduces the number of risk-adjusted contributors and is more aligned with other bank requirements.