European Banking Union B: The Single Resolution Mechanism
Yale Program on Financial Stability Case Study 2014-5B-V1
17 Pages Posted: 14 Mar 2015
Date Written: November 1, 2014
The options available to European governments to respond to a multinational bank in financial trouble have been severely limited since each country has its own unique laws and authority applicable to banks operating within its borders. The Bank Recovery & Resolution Directive (BRRD), which was adopted in 2013 and scheduled to go into effect January 2015, harmonizes rules across EU countries for how to restructure and resolve failing banks. However, the directive would maintain the existing system of individual national resolution authorities and resolution funds. To better secure the Eurozone banks and to compliment the Single Supervisory Mechanism, which was enacted in April 2014, the European Parliament approved the Single Resolution Mechanism (SRM). The SRM establishes a Single Resolution Board and a single Resolution Fund that will handle bank failures in all EU countries participating in the SSM. This case reviews the changes in Eurozone bank resolution resulting from the BRRD and the SRM.
Keywords: Systemic Risk, Financial Crises, Financial Regulation
JEL Classification: G01, G28
Suggested Citation: Suggested Citation