Banco de Portugal, Member of the Board of Directors
Deutsche Bundesbank, Member of the Executive Board
Autorité de Contrôle Prudentiel et de Résolution, Secretary General
European Commission, Director, Regulation and Prudential Supervision of Financial Institutions, DG for Financial Stability, Financial Services and Capital Markets Union
Ministry of Finance, Bulgaria, Deputy Minister, Member of the Economic and Financial Committee
Ministry of Finance, Estonia, Deputy Secretary General for Financial Policy and External Relations
European Banking Authority, Director of Regulation
BNP Paribas, Chief Operating Officer
Association of German Public Banks, Chairman of the Management Board, BayernLB and President, VOEB
Diederik van Wassenaer
ING Group, Head of Global Regulatory and International Affairs
1. The ultimate goal and benefit from regulation in Europe should be to build a single market; however, this requires building trust between supervisors
The panel’s discussion addressed three main questions, the first being to do with the international banking framework at the global level, and in particular, how the adaptation of international legislation is impacting the framework under which the EU is operating. From the industry side, there has been clear demand for the European Union to be more ambitious in creating the conditions for realising the global benefits that can arise from common legislation inside banking union. The use of liquidity and capital at the consolidated level constitute another dimension to this issue.
Host country representatives, however, may have a different view since without completion of banking union, there will be imbalance between common supervision, common resolutions, and financial stability based on national instruments. The goal is banking union, but it is still missing one of the key pillars that it requires; that pillar is controversial, but needs to be in place. The current proposals are positive, from the perspective of the representative’s institution, but possibly do not go far enough.
A representative of a public authority added that the EU needs to be able to demonstrate progress, but also to have a clear target. The goal should not just be establishing a common banking union, but to reduce costs for end users. This relates to the question of how much regulation is required to foster growth; the right balance will need to be struck between the regulatory burden, the need to keep risks low to have a secure environment for business, and the need to have low costs.
1.1. An optimal use of liquidity by banking groups in the EU, improved cost efficiency, and financial stability are the main objectives of the EU single banking market
An industry representative stated that it is important both to move forward, and to have a clear idea about the direction in which the EU is heading.
The European Commission has made a proposal about how to solve this, but this solution is complex and its conditions are difficult to meet. It is also of concern that, within the community of people who discussed those proposals, there is no common ground for adopting them. From the previous year’s ECB data, there was roughly €370 billion of inter bank lending across borders within the Eurozone, just within one institution; this figure used to be significantly higher. Creating single liquidity sub groups is important for both the banks and for the wider economy, and will help to drive down costs, but doing so does not appear to be a priority. According to this industry representative, the commitment to creating a banking union appears to be lost.
Another industry representative stated that the ultimate goal of regulation in the EU should be to build a common market within the framework of the banking union; this is one of the benefits that will arise from having common regulation, supervision, and resolution tools and funds. The existence of a ‘level playing field’ is a frequent topic of discussion, and one of the major advantages that US banks enjoy is their very large internal market. As the Basel Committee proposes to impose liquidity ratios at the level of holding companies, it is clear that asking for compliance with those ratios at the level of each legal entity within a group will clearly create some constraints. To fully comply with the Liquidity Coverage Ratio (LCR), banks with several entities in multiple member states within the banking union will ultimately show a ratio that is much higher than 100%, around 120% to 130%, and this will be costly.
A third industry representative added that, although stability is required, there is also a need for EU banks to be competitive with US banks and other competitors outside of the EU.
A clear alert was made by several public authorities’ representatives on the difficulty to progress in a cross border waiver since stabilisation mechanisms, including the possible use of the deposit guarantee scheme, would remain at the national level (again as a consequence of the unfinished banking union).
1.2. Increasing the level of trust is necessary but is a lasting task, since individual EU countries are starting the process in different situations
A representative of a public authority stated, speaking from the perspective of a country that is mostly a host country, that banking union is a process, rather than something that is immediately ready. The fact that the issue of home/host countries remains so high on the agenda is probably evidence that the system has not yet built enough trust for participants to be certain how it functions, and it is therefore not yet time to move to a fully centralised paradigm. This issue reflects a broader issue of trust, and the EU needs to be patient in increasing these levels of trust and considering the detailed proposals; the next steps may need to be rephrased to make them better nuanced.
Another public authority representative observed that global financial minimum standards have been discussed in various fora, and the European Commission has put forward proposals regarding them; some have already been implemented, and some not yet. The principal test of these may not necessarily be the final cost for the banks and their clients, but the extent to which the measures protect financial stability, how much they improve the banks’ strength, and how much they bolster market confidence.
A third representative of a public authority noted that banking union is clearly an extremely important issue for Europeans, as the core benefit of EU integration is to realise the benefits that economies of scale can provide. However, individual countries are starting the process in different situations, and steps need to be taken to overcome these barriers and build trust. Regulations need to be designed to clearly signal that steps forward are being taken, and the process cannot be completed immediately, but it is important to bear in mind that the EU will face problems if this process does not proceed.
2. Regulatory progress toward further integrating the EU single banking market, has been made, but some adjustments are required to address certain domestic financial stability concerns and enable banking groups to reap expected benefits
The Chair invited the public authorities represented at the roundtable to give their views on what has been done and proposed by the EBA and the European Commission; whether this could go further, how deeper integration can be pursued, and what ingredients are missing from this integration at present.
One public authority representative replied that progress is clearly being made, and the goal now is to ‘land well’: in practice, this means combining the two objectives. Financial stability includes protecting depositors, which has been the minimum objective since work on the banking directive began. There is a tension, however, between doing this and being competitive. Having worked in regulation for a long time, the speaker believes that a number of obstacles to this have now been eliminated: implementation of the single rulebook has been a lengthy process, and supervision is now on track. Given this tension in maintaining financial stability – which may not be translated into a generalised financial instability in the EU but concentrate in certain national, regional or local markets – there is still some value in this, and this tension needs to be maintained while providing the progressive ability to go further.
However, liquidity is an issue that the EBA should look into: the regulation related to liquidity is recent and the EU should assess the benefits of it. The EBA needs to be confident that it has a single role in relation to this, and that it knows how to operate. There are also more technical provisions to look into, such as the interdependence of assets and liabilities, including cross border ones; this could very quickly be dealt with, and should be a priority.
A public authority representative observed that the European Commission needs to deal with competing objectives. The first objective is for banks to be able to benefit from the single market: it has existed for a long time, but large banks do not yet fully realise the benefits of it. Although banking union has not yet been finalised, a major step has been taken towards its creation, and this ought to be recognised. The second objective, however, is that there are legitimate concerns with respect to domestic financial stability, especially on the part of host member states.
Commenting on this, an industry representative stated that the way that the ECB now regulates banks is hugely different from 10 years ago, and represents a significant improvement. 10 years ago, everything was fragmented, and while there were supervisors, these were not particularly effective in governing large conglomerates, which was a contributing factor to the failure of some of these conglomerates. Banks may think that the regulation that exists today is intrusive, but it is very thorough, and lessons learned in one group can be used to the benefit of others.
3. Remaining challenges
3.1. Further reducing the constraints imposed at an individual level remains a challenge
A representative of a public authority noted that, regarding the LCR issue, and specifically the waivers for capital and liquidity requirements, the European Commission has tried to strike the right balance. It wants to give supervisors the option to lift the requirements at an individual level, but as this is only an option, the supervisor will ultimately have to decide what to do. In the Commission’s view, this makes sense, particularly where the bank has the same supervisor in both its home and host member state.
Representatives from the industry argued that now was the right time to move towards making it easier for large banks to benefit from the single market and banking union, but the Commission has taken the concerns of host member states into account by making sure that the parent undertaking remains responsible for requirements that may have been lifted. In fact, it has gone further, as it has said that half of the promise that is still there has to be backed by collateral, and that the collateral needs to be governed by the law of the host member state. This solution does not please all parties, but allows for progress to be made while heeding the concerns of all sides. Host countries are particularly worried with this understandable desire from the industry, given the incompleteness of Banking Union.
A representative of a Central Bank noted that some people have expressed the view that the European Commission has not gone far enough, but others are of the opinion that the relationship between home and host is not sufficiently balanced.
3.2. The interconnectedness criteria of the G-SIB framework, still ignores the Banking Union despite the creation of the SSM and SRB
An industry representative commented that another hurdle that is preventing big banks from benefiting from the single market, even within the banking union, is the interconnectedness criteria in the qualification and the quantification of G SIBs. For example, when a non German bank extends a loan in Germany, or a French bank extends a loan in Italy or Belgium, this is considered to be a dangerous cross border exposure. The initial rationale for this was that these cases would be more difficult to resolve, should resolution become necessary, because there would be several resolution authorities. Within the context of the banking union, however, there is one single resolution authority with one single resolution fund, so this provision is an ‘oddity’. G SIBs should, in theory, not continue to be penalised by an identification methodology that considers activities within the banking union as cross border; however, the application of different national laws (e.g. consumer protection, enforceability, foreclosure, different judicial systems, different tax regimes) become an element which must necessarily be considered as a risk factor.
3.3. Achieving an effective level playing field within the EU single banking market is another important target
A public authority representative stated that the discussion about a level playing field is not only about how the EU relates to the US; it also includes having a level playing field within the EU. There is a stability argument concerning competitiveness, but it will not be possible to have a level playing field – which is a desirable outcome – without the commitment of active banks. Neither the regulators nor the European Commission can achieve this by themselves. In practice, a level playing field will only be able to exist if international rules are implemented in a consistent manner across the EU, and then the EU will also be able to compete with the US.
4. Taking into account EU specificities, in order to enable the optimal capacity of banks to finance the economy, is an essential regulatory outcome
The second topic for discussion of the panel was about challenges: opportunities exist, but fine tuning and timing are the critical elements. One of the objectives is to create a level playing field; another, following the 2008 crisis, is to stimulate the capacity of banks to finance the economy, recognising the significant difference between the situations in the EU and in the US, and how these affect capital funding and banking funding to the real economy. In several areas, this concern is particularly addressed by support factors alleviating regulatory risk weighs (small and medium enterprises and long term investment projects): a study has been completed by the EBA, attempting to understand how these existing mechanisms have performed.
4.1. An accurate description of EU specificities is necessary
A public authority representative began by stating that this is a very interesting question; it is also one of the main novelties that have occurred in recent years. The EU is now well equipped to be active in the discussions at Basel, with a better EU perspective. The role of EBA in producing evidence from the EU perspective, supported with data and instilling a coordinated stance, should not be underestimated. EBA has contributed a large amount of evidence regarding the EU specificities, and is in a good position to present this at a global level and also ensure a common assessment of what EU specificities are, because the same conservative approach also needs to be adopted when dealing with these specificities.
However, the EBA also aims to ensure that the EU is Basel compliant, and it therefore plays a dual role: ensuring that EU specificities are taken account of in the new global rules, and also ensuring that the EU adheres to these global rules. It is the EBA’s view that not only the European Commission, but also the Council of the EU and the European Parliament, are with them afterwards. This process of channelling, interplaying and being explicative while providing evidence is a new process that the EBA has not experienced at this scale before.
4.2. Achieving a wide EU political support requires the international banking standards defined at the global level to take EU specificities regarding SMEs, covered bonds, mortgages, securitisation, and related issues, into account
4.2.1. Many EU specificities are being addressed
A public authority representative observed that covered bonds are a very well known feature, and are now under discussion, whereas they were not covered during previous Basel negotiations. Also, Simple, Transparent and Standardised (STS) Securitisation was a major file, and represented a turning point. This meant that the EBA could gain a very good understanding from its global counterparts about a simple, transparent, and less risky securitisation; the speaker expressed the hope that this can be translated into EU law at some point.
The issue of mortgages is a special case, wherein the structures are completely different, and progress has been made in this area.
A representative of the industry stated that, regarding mortgages, the main point is not that the real estate market is hugely different between the EU and the US; it is that EU’s creditor protection practices are more creditor friendly. The way that the EU deals with the practicalities of enforcing mortgages is completely different; in most States in the US, this is very weak, and the representative’s impression is that this is why the US has a government entity taking over all of these mortgages. It is not safe for a bank in the US to keep a mortgage on its balance sheet; nevertheless, the US regulator believes that they have the best system, and that this should be imposed on Europe, apart from the way in which they deal with mortgages.
This file is still open, and in this area, the EBA has been very clear that the structure in the EU is not so risky. In the EU, mortgages go through banking, channelling the credit of banks, while in the US, a large proportion of mortgages are the responsibility of federal agencies, which makes a difference to the structure. Progress has been made towards recognising this, but there is still a ‘stalemate’ at Basel, and further progress will need to be made.
Another public authority representative added that the EU should not necessarily oppose international standards, as these have a lot of value. They allow best practices to be adopted, and ensure a level playing field at the global level. However, the EU has done a good job at international level, within the FSB and at the Basel Committee, to make sure that EU specificities are taken into account, such as in the area of covered bonds. The EU has also promoted the concept of STS, with some success.
The public authority representative hopes that a deal regarding this legislation can be agreed by the Council of the EU and the European Parliament by the summer. Progress has been made at the international level, which to some extent lessens the necessity to make adaptations at EU level, but some adaptations are still necessary.
The package that the European Commission tabled in November contains trade offs, and these trade-offs need to be dealt with one at a time, looking at the importance of the banking sector for the EU economy at large and the fact that the EU’s real estate market is very different to what exists in the US. There is a need to bear in mind, for example, the fact that the EU wants to develop its market based finance, and therefore cannot necessarily just ‘rubber stamp’ what comes from the Basel Committee. The Commission has tried to identify trade offs and propose solutions that would benefit both the solidity of the banking system and its ability to fund the economy, which are not competing objectives.
4.2.2. Certain regulatory adjustments introduced suggest that the global standard is not adequate to the EU
An industry representative stated that the EU needs to strike the right balance between economic growth, regulation, and financial stability. If financial stability were to dominate at the expense of the others, there would be little risks in banks’ balance sheets, but also sluggish economy, less business and less jobs.
Another public authority representative objected that they do not contrast regulation and growth: solid regulation is necessary for banks to be able to fund the economy.
In the area of regulation, where individual businesses, industries, SMEs or elements of trade finance are exempted from a rule, it may be the case that the rule is not correct, and if the rule were improved it might not be necessary to make such exemptions. Rather than exempting certain industries from regulations that are harmful, it might be better to amend the original regulation.
A public authority representative noted this point, but added that it is less clear what can be done in the area of SMEs. Another industry representative stated that, regarding the issue of complexity and exemptions, they welcome the existence of these SME factors, qualified infrastructure projects, and related items. The EU’s economy is different, and this needs to be recognised: 98% of Europe’s companies are SMEs, and so there need to be differences in its banking system, which is long term and based on loans. The EU should not copy every aspect of another system. However, what has been done already and is being done now is on the right track; for instance, promotional banks are quite well reflected.
4.3. Just introducing exemptions and adaptions at EU level is not the appropriate approach
A public authority representative stated that they mostly agree with what has been said. Recalling the Stability and Growth Pact, the speaker noted that with the fiscal regulations, the starting point was a very simple framework, to which increasing numbers of exclusions from the general rule were added. The end product was hardly manageable, and the EU risks producing a similar result in this area if it introduces this number of exclusions. The Chair agreed: there is a need to be very careful when creating exemptions from the general rule, because there is a risk of creating increasing numbers of these. Exemptions should be limited.
Another public authority representative stated that during the negotiations in Basel, although these changes were argued for, it was difficult to secure them, because the consensus post crisis was different. What was achieved was itself difficult to secure, especially securitisation and interest risk in the banking book. While there might be consensus that the regulation should be amended, from a practical perspective, there is wider consensus among the people represented at the roundtable that it is better to close a regulatory file. Although this regulation might be imperfect, it is better to stabilise it for a period of time and then move to supervision, which will produce more accurate data that can be used in the next regulatory forum. At Basel, a cycle was finalised, and it will not be possible to reopen this debate immediately. The result could have been better, but also could have been worse. Now, the priority is to capitalise on what has been done.
A third representative of a public authority replied that the argument that ‘it is done differently in the EU is not enough; the point is that what is done is different from a risk perspective, and EU practices have delivered the same, or better, results. This is the root of the legitimacy of the EU methods, rather than the EU simply not liking something that the US does and therefore doing it differently. The EU does things differently for a reason.
5. Harmonising international regulation while recognising differences leads to the proportionality issue
The final question relates to the process of harmonising international regulation while, at the same time, recognising differences. This gives rise to a huge problem: introducing proportionality and flexibility while having a common rulebook internationally, with the detail remaining inside the EU and the banking union. Fine tuning this issue is very complex, and it raises serious questions: some of the Basel derived legislation applies only to global banks, which is then being adapted in the EU to make it acceptable to all business models, and it needs to be asked whether this is the right path.
5.1. The initial consensus at the global level was to apply sophisticated rules to bigger banks and some more standardised rules to smaller ones
A public authority representative recalled that, in the past, the EU legislator decided to apply the Basel rules to the entirety of the EU banking sector; there was consensus on this. It must be remembered that within the Basel rules themselves, there are some very sophisticated rules that apply to the bigger banks and also some more standardised rules that apply to smaller banks, and as such, the Basel rules contain a certain degree of proportionality.
Since this time, thinking on this topic has evolved. The European Commission launched a call for evidence a couple of years ago, to gather evidence regarding the suitability of the framework that is applicable to financial services; proportionality was a dominant theme in the responses that it received, and was backed by fairly convincing evidence, which was not the case with all of the responses. As such, the Commission has looked into the feasibility of introducing more proportionality into its banking legislation, and has come up with a number of proposals regarding reporting on disclosures and banks that have small trading portfolios. The Commission believes these provide meaningful alleviations for banks that need such alleviations, and that this will contribute to the goals of funding the economy and promoting competition.
The same rules need to be maintained for banks that are roughly the same size, have the same business models, and the same types of interconnectedness. It is possible to move towards a more granular single rulebook without questioning the notion that there should be a single rulebook, and this is what the Commission has aimed to do in its proposals. Some argue that the Commission could go further, and this can be debated, but doing so will be difficult if the goal is to reconcile having proportionate rules and having a level playing field within the single market.
However, although the Commission’s proposal probably reduces the amount of reporting – which is welcome – the regulation itself is not adapted to different business models. For instance, a deposit taking bank experiences a lot of difficulty when going into the market to raise MREL. Applying or creating believable buffers in a traditional bank raises difficulties, and application can be hard.
5.2. Basel III rules were clearly designed to the structures and business models of large, internationally active banks
A public authority representative stated that their country has roughly 1,900 banks: 23 are under direct ECB supervision, and the rest are not. The banking market in this country is very fragmented, and the Basel III rules were clearly designed to fit the organisational structures and business models of large, internationally active banks. This is fair, in the speaker’s view: following the crisis, all parties aimed to regulate these banks because they were the source of risk, and this was the right thing to do.
However, the EU banking sector does not only consist of large, internationally active banks: it has a wide range of small and medium sized banks, with fairly simple business models, and a local or regional focus. The regulation was not designed with these banks in mind, and the Basel Committee was not meant to cover every bank in the world, but rather to cover internationally active banks.
It is therefore necessary to consider whether every bank, regardless of its business model and international activity, ought to be regulated and supervised in the same way. The public authority representative is of the view that it would be disproportionate to do so; the principle of proportionality, in their view, is important. There needs to be a proper reflection of the diversity of the EU banking landscape, although this should not compromise the goal of having a global level playing field, or act as an excuse for amending liquidity or capital ratios. However, some measures can be taken to create a more appropriate and proportionate method of regulating and supervising.
An audience member commented that this point is a good one: banks have different business models, and it could therefore be argued that all the rules that apply to the larger banks should not apply in the same way to other banks. This is why this distinction has been made in the US. There will be a single deposit guarantee system in the EU, so ultimately the larger banks would guarantee the deposits of smaller ones to which different rules apply.
The audience member asked whether a country such as the public authority representative’s might have two deposit guarantee schemes, one applying to smaller banks with a different regulatory regime and one for the larger banks. This public authority representative, referring to a very particular national situation, replied that, typically, there are three deposit insurance schemes: one for the savings banks, one for the cooperative banks and one for the private banks. Having multiple deposit guarantee schemes would not harm this country.
An industry representative stated that they fully agree with the speaker from the public authority. The same risks should be governed by the same rules, and there should be proportionality for the smaller banks. The rules might be stricter for smaller banks, which may not be able to measure risk in as sophisticated a manner as the larger banks can, but these rules have to be simple, which is the most important thing, whereas in relation to large banks, considerable improvement is expected in the adequate measurement of complex and often opaque sources of risk. In this sense, the EU can learn from the US, which has the principle of a simple model for medium sized banks.
Another public authority representative added that proportionality is very important in this environment, but the first point that needs to be remembered is that the single market and its rules are not only intended for big banks: they are as important for medium sized banks, and maybe even smaller ones. However, in order for them to function properly, there needs to be some proportionality in the regulation, or smaller banks will be excluded from the market. The second point is that it is important to not over regulate banking in a way that makes it too closed to entry, both for traditional banks and, to an extent, for financial innovation and fintech. Integrating these into banking and capital markets regulation is partly also an issue of proportionality.
5.3. Being proportionate applies to the financial stability issue posed by banks, but also to financial instruments such as repos
A representative of the industry stated that in case the regulation creates a kind of safe haven, especially for reporting purposes, they are prepared to accept that very small banks do not deserve to be obliged to provide to supervisors the level of detail currently required, and that small subsidiaries of big banks should be exonerated in the same way.
In the original meaning of the EU regulation, being proportionate means being relevant to the purpose followed, and not overshooting in order to address a certain target. One relevant example is the treatment of repos and reverse repos in the net stable funding ratio: the net stable funding ratio is an issue of long term funding, and it could be argued that it is not proportionate to impose a punishing treatment for repos and reverse repos of less than six months’ maturity. These are completely out of scope, and in most cases, these are very liquid assets that are exchanged against cash: liquidity against liquidity, cash against bonds or cash against Obligations Assimilables du Trésor (OAT). It is not clear why the EU would want to punish this from a long-term financing perspective.
However, some people argue that the purpose of this item of the regulation is not to address the funding of banks through the repo, but to limit the funding of illiquid assets by the shadow banking system. Indeed, the shadow banking system seeks funding from banks, providing them illiquid assets as a guaranty in the form of repurchasing agreements. Regulators would want to limit this source of additional leverage, however, to be more proportionate, this rule should only be imposed to unregulated entities. Currently, the proposal is to impose this on all financial entities, which may harm the shadow banking system but is more certain to harm market making. If the EU wants to develop market based financing of the economy and securitisation, it needs market makers that are banks, and these will need to have an inventory and be able to repo it and the also to reverse the repo in order to find the securities that they require for their short. The basic business of markets and market making requires complete fluidity of the repo market, so this specific rule seems disproportionate in the light of what is intended.
5.4. Three important objectives should be combined: reducing unjustified compliance costs, achieving similar soundness and resolvability whatever the size of a bank, and avoiding unnecessary regulatory complexity
A public authority representative stated that there is still room for improvement in the EU; the European Commission’s proposals are therefore welcome. Two different goals should be borne in mind: the first is the need to reduce unjustified compliance costs. Sometimes, the EU produces standards that require very granular reporting; the amount of granularity is increasing, and as such the EU needs to be very cautious in this space. Everything that is done is very formal, which is very useful to some banks, but may be less useful to others.
However, banking is a public service, and the EU should also aim to not decrease the distance to default for these banks. Otherwise, when a small bank defaults, they will ask the supervisor what they were doing to avoid this situation. The core elements of any bank are essentially credit risk and liquidity, and for these purposes, there needs to be a very strong distance from default. In this sense, there is an implicit comparison to the US. The US does not apply the Basel standard to the lower, but does apply an enhanced leverage ratio, and the speaker is not certain that this is the approach that the EU should take, given how attached it is to risk sensitivity. Prioritising supervision on basic items that define the distance to default means de prioritising items that are less useful for that purpose.
One participant from a Central Bank stressed that the US has a mechanism for winding down and resolving banks sitting with the FDIC, which is a major difference from the EU system, and this is absolutely essential for stability.
Another public authority representative replied that it is fine for some people to want to go further than what the European Commission proposed in November, and this can be examined in the context of a future new legislative proposal. However, if proportionality is to be managed well, this cannot involve just looking at the size of banks, but also at business models, interconnectedness, and everything else that can be a source of risk. This leads to significant complexity, with a matrix that applies very different rules to the various banks, and can create a regulatory framework that is very difficult to manage, with inevitably more arbitrage and gaming possibilities and issues of thresholds between the different banks. Some people argue that the US system should be adopted in the EU, but the US system is extremely complicated, and applying it in the EU would probably require something that is even more complicated. However, the European Commission does not have a closed mind on this issue.
5.5. The economic differences between member states might also deserve specific approaches
Acknowledging that this is a provocative statement, a representative of the public sector commented that while it has been said for a long time that the same rules should apply throughout the banking union, when it comes to the application of the rules – such as MREL and a number of the applications of BRRD – there might be a need to reassess this statement, and try to understand the different realities inside the banking union for the sake of the banking union’s survival. The differences between member states may create significant problems in the practical application of the single rule book.