The Commission has announced its proposals for a Single Resolution Mechanism (SRM) for the Banking Union. The SRM aims to ensure the application of relevant provisions in the RRD to all banks in Members States within the Single Supervisory Mechanism (SSM). Aligning supervision and resolution at the same level will help prevent tensions between the single supervisor (the European Central Bank (ECB)) and relevant national authorities. The SRM will also contribute to breaking the link between sovereign and banking crises, given the clear rules and funding arrangements to avoid public bail-outs. The operation of the SRM will involve:
- ECB signalling when a bank needs to be resolved;
- a Single Resolution Board, with representatives from ECB, the Commission and relevant national authorities preparing the resolution;
- the Commission taking the final decision to place a bank into resolution;
- implementation of the resolution plan by national authorities; and
- pooling national resolution funds into a Single Resolution Fund that would be used to ensure funding support while the bank is being restructured.
The Commission estimates that, with the CRD4 package and the RRD in place, needs for further bank recapitalisation will be rare but, as this possibility will always exist, the European Stability Mechanism will be allowed to recapitalise banks directly once the Banking Union is established. In respect of the resolution of cross-border banks established both within the Banking Union and in a non-participating Member State, coordination through resolution colleges and EBA mediation will continue to apply. The SRM proposals will also seek to avoid discrimination against credit institutions, deposit holders, investors or other creditors on grounds of nationality of place of business. (Source: Commission proposal for a Single Resolution Mechanism)