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EU resolution authority must improve bank wind-down planning, auditors say

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EU resolution authority must improve bank wind-down planning, auditors say

There are shortcomings in the contingency plans for bank resolution prepared by the European Union's Single Resolution Board, according to the European Court of Auditors, which has made a number of recommendations to the agency's rules, guidance and preparation on resolving failing banks.

In a report published Dec. 19, the auditors said that the SRB, which was established to help prevent another financial crisis, is still "very much a work in progress" and has been required to take on considerable responsibilities in a short span of time.

While the SRB has preliminary versions of its resolution plans in place for most banks, those adopted so far do not meet the standards laid down, the auditors said.

They recommended that the body should first determine when the first rulebook-compliant resolution plan is to be drawn for each lender, and should prioritize them in terms of risk of failure. The SRB also needs to finalize a system for resolution planning to ensure that the banking sector has enough loss-absorbing capacity, including a policy for determining minimum requirements for banks' own funds and eligible liabilities, while it also needs to address issues of staffing, according to the auditors' report.

Meanwhile, the European Council on Dec. 18 extended Elke König's mandate as chairperson of the SRB for a further five years, as from Dec. 23. König, who oversaw the resolution and sale of troubled Spanish lender Banco Popular Español SA to Banco Santander SA, has been in charge of the SRB since 2014.

Separately, König told Bloomberg News in an interview that the agency's priorities for the year ahead will be streamlining banks' corporate structures and making sure banks can be wound down in an orderly fashion in the event of a crisis.