single resolution board annual conference – brussels, 19 september 2022 armed peace and risk proportionality : how to strike the right balance speech by francois villeroy de galhau, governor of the banque de france page 1 sur 5 ladies and gentlemen, it is a great pleasure for me to be with you at the european commission for the 2022 srb annual conference, and i would like to warmly thank dr elke konig for her invitation to give this keynote speech today. above all, i would like to pay tribute to elke for her hard work as first chair of the srb since its creation in 2015 – srb staff can also be very proud. you have a strong ally in france, with whom i have great pleasure working each and every week : dominique laboureix. i won ’ t be betraying any great secrets by saying how much he enjoyed taking part in this creation, and how much he remains attached to the srb. the title of this conference ( “ european banks : resolvable and ready for crisis? ” ) may cause some anxiety – yet a healthy type of anxiety. it reminds us of possible dangers ahead, and serves as a strong reminder of what happened to banks during and in the aftermath of the great financial crisis. the temptation to forget about these events would be a huge mistake : lessons of the past, especially of that kind, should remain vivid memories that motivate us, day after day, to build a safer system. the “ philosophy of resolution ” is rooted in those rough times ; we do not want to live again under the threat of “ too big to fail ”, and without living wills. eu lawmakers and regulators quickly learned the lessons. beyond the crisis management regulation ( brrd and crr ), the banking union launched in 2014 is in its own way an illustration of clausewitz ’ s military theory. it has strategic objectives ( or ziele in german ) – establishing a stable, safe, and reliable banking sector, but also offering the right conditions for the emergence of paneuropean groups. it also set political goals ( zwecke ) through its three pillars. and lately, it has directed its efforts ( schwerpunkt ) mainly – and maybe excessively – towards the third pillar edis ( european deposit insurance scheme ). today we should turn our main efforts to enhancing implementation of resolution, in order to make it even more efficient. although it is less frequently page 2 sur 5 commented

better take into account certain strategies, and thereby accept a certain level of risk. a likely effect of recovery options or transfer tools is that the structure of the remaining group might become less complex and therefore carry less risk. besides, the stance on waivers of internal requirements for entities located in the same member state ( or even in the same banking union ) has proven overly conservative. we need pragmatism, and consistency between the srb and the ssm : when an entity has been waived from capital requirements, or is simply not subject to capital requirements, the resolution authority could apply the same on mrel. proportionality to risk could entail other changes, such as the calculation of banks ’ contribution to the srf. as of today, the size of institutions has an overwhelming importance in the determination of these contributions. this is more than questionable : size does matter in order to bring an institution under the scope of resolution, but size and risk are two different notions and they should be more clearly differentiated in technical implementation. in order to ensure the fairness of contributions, and greater adherence to the srm overall, it is necessary to adapt formulae accordingly. beyond fairness, penalising the largest banks or groups prevents the emergence of pan - european groups, which is one of the banking unions ’ objectives. here let us acknowledge that page 5 sur 5 we have collectively failed so far ; we have a banking union without really crossborders european banks. this is a major weakness. this is where we should bring our ziel, our strategic objective, into our field of vision. and even more so since mrel requirements in the european union are, on the whole, far more stringent than the tlac international standards and their translation into other jurisdictions ’ regulations. * * * let me conclude by saying that, in 2022, after the first seven years of existence of the single resolution mechanism, it may be time to recall what clausewitz rightly identified as the greatest difficulty : “ to adhere steadfastly in execution to the principles which we have adopted. ” that does not mean showing rigidity in technical implementation, on the contrary. it means taking a risk - based approach and conducting a balanced analysis of the best way forward in order to serve these principles in a relevant way. i will end my speech with another phrase of roman wisdom : in medio stat virtus, virtue lies in the middle. i thank you for your attention.