Contributions to the SRF: What risks need to be assessed?

Abstract:

There is general agreement that the banking sector should pay for its own safety net, meaning that resolution and deposit guarantee funds should be financed by contributions from the banks themselves. This principle lies at the heart of the approach taken in the EU Directive on (national) Deposit Guarantee Schemes (DGS) and is enshrined in the basic rules of the Single Resolution Fund (SRF). Moreover, there is also a consensus that contributions should be based on the risk profile of each bank – as an essential precondition to providing individual banks with the proper incentives to internalise the potential costs related to bank failure. It is, however, questionable whether the current methodology to calibrate contributions fully succeeds in this aim.

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