Research Handbooks in Financial Law series
Edited by Matthias Haentjens and Bob Wessels
Chapter 7: The Single Resolution Mechanism in the European Banking Union: Legal foundation, governance structure and financing
The current economic and financial crisis has shattered the premises of the post-war European and international financial system; established theories, policies and institutions were challenged and were found unable to prevent and mitigate the consequences of a systemic crisis. It further highlighted the deficiencies in the European banking and financial supervisory structures and revealed the absence of the requisite crisis management mechanisms for the cross-border resolution of banks. In response to the global and European financial crisis, in 2012 the EU political leaders decided to move towards the establishment of the European Banking Union (EBU) comprising three pillars: a) the Single Supervisory Mechanism (SSM); b) the Single Resolution Mechanism (SRM); and c) the Common Deposit Guarantee System. To the abovementioned pillars, the single rule-book (Capital Requirements Regulation, Capital Requirements Directive, Bank Recovery and Resolution Directive (‘BRRD’)) should be added. The EBU is not created from scratch but it builds on the edifice constructed over the last thirty years starting with the EC strategy for 1992. Under the first pillar, the SSM, the European Central Bank (ECB) will become as of November 2014 the European supervisor of the most significant European banks in the Euro area and the non-Euro area participating Member States. The second pillar, the SRM, comprises the Single Resolution Board (SRB or Board) – established as an EU agency9 with significant powers during the various stages of the resolution process – and a Single Resolution Fund (SRF or Fund).
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