Less Than a Third of Bank Supervisors Conducted Resolution Exercises Last Year

Data from Central Banking's Supervision Benchmarks 2026 reveals that less than one-third (28.6%) of surveyed supervisors conducted tabletop or simulation exercises for bank resolution over the past year. Among the 36 respondents, only 10 had run such an exercise, with Europe showing the highest regional participation at 40%. This highlights a potential gap in preparedness for managing bank failures.

Context

Resolution exercises are designed to test banks' ability to manage failures and ensure continuity of operations. The data comes from Central Banking's Supervision Benchmarks 2026, which surveyed 36 bank supervisors. With only 28.6% having conducted such exercises, the findings indicate a significant gap in the current supervisory practices across the industry.

Why it matters

The low percentage of bank supervisors conducting resolution exercises raises concerns about the financial system's readiness to handle potential bank failures. Effective resolution planning is crucial for maintaining stability in the banking sector. Insufficient preparation could lead to severe consequences during a crisis, affecting both the economy and public confidence in financial institutions.

Implications

If the trend of low participation in resolution exercises continues, it could lead to a heightened risk of systemic failures during financial crises. Banks that lack adequate preparation may face greater scrutiny from regulators, potentially resulting in stricter compliance requirements. Stakeholders, including investors and customers, may also experience increased uncertainty regarding the stability of financial institutions.

What to watch

In the near term, regulators may increase pressure on banks to enhance their resolution planning and conduct more simulation exercises. Observers should monitor any policy changes or guidelines issued by financial authorities aimed at improving preparedness. Additionally, upcoming reports or surveys may provide further insights into trends in bank supervision practices.