Cross‐Border Coordination of Bank Resolution in the EU: All Problems Resolved?
20 Pages Posted: 11 Sep 2015 Last revised: 19 Apr 2016
Date Written: April 15, 2016
Substantial progress has been made, both within the Eurozone and the EU generally, with regard to the legal and institutional arrangements for cross-border bank resolution. The new framework, modeled after the FSB's "Key Attributes of Effective Resolution Regimes for Financial Institutions" certainly reflects a very strong commitment to cooperative rather than "isolationist" approaches (such as the ring-fencing of foreign-owned branches in insolvency). The paper evaluates the relevant provisions under both the Bank Recovery and Resolution Directive of 2014 and the Single Resolution Mechanism Regulation in the light of past precedents. It argues that the mere existence of this new framework does not remove residual conflicts in the economic interests of the different jurisdictions involved in cross-border cases. Only future practice will show how these conflicts can be balanced out – and whether the Eurozone, with centralised decision-making by the SRB, will compare favourably against the rest of the EU in this regard. Very likely, the cooperation arrangements as such will have to be complemented by further improvements in terms of the predictability of economic outcomes in order for Member States to submit themselves without reservations to full and unreserved cooperation over time. Even then (somewhat ironically, given the long-standing harmonisation of recognition standards within the EU), the potential for obstructions by national courts, as evidenced by recent court decisions in Germany and the United Kingdom, could yet become a severe, unforeseen source of obstacles to coherent and consistent resolution actions both within the Eurozone and the EU as a whole.
Keywords: Bank Resolution; cross-border bank insolvency; BRRD; Single Resolution Mechanism
JEL Classification: G21, K20, K22
Suggested Citation: Suggested Citation