Auditors call for continued vigilance on the financial risks of the EU’s bank resolution system

​​In 2021, risks to the EU's system for managing the orderly winding-up of failing banks within the Banking Union decreased. But this is no reason for the EU to let its vigilance slip, the European Court of Auditors warns in a report published today.

The European Court of Auditors has an obligation to report each year on any financial risk relating to the Single Resolution Mechanism (SRM), the EU system managing the orderly winding-up of failing banks within the Banking Union. For the 2021 financial year, the Commission and the Council did not report any contingent liabilities, while the Single Resolution Board (SRB) has reported some related to pending litigation concerning banks' contributions to the Single Resolution Fund (SRF), a fund which can be used to support bank resolutions. The auditors consider these disclosures appropriate, but recommend improvements to the monitoring of financial risk and to the method for calculating possible reimbursements of legal costs.

"The European Court of Justice has now issued judgments on five key legal cases contesting the SRB's first resolution decision - that of Banco Popular Español", said Rimantas Šadžius, who led the audit during his mandate as an ECA member. "In our report, we note that the resulting legal certainty has decreased the level of financial risk to the Banking Union. We provide a detailed overview of the remaining risks, and recommend further improvements to the monitoring and calculation of possible financial consequences."