Into the Μaze of Legitimacy and Efficiency; The Single Resolution Board As a Necessity

Abstract

The process of agencification does not constitute per se an innovation within the EU legal order. It embodies, in many occasions, the transition from national schemes of administration to more centralised, politically neutral agencies that allow for a higher level of expertise at the Union level and better coordination of cross-border activities; in the case of the banks, that is achieving efficiency in bank supervision and resolution.

Before the crisis, the Member States’ strong belief that financial regulation is an integral part of national sovereignty and the lack of any significant cross-border banking failure in the EU led to the crystallisation of the – then – status quo; bank supervision and resolution remained essentially national. Then came the crisis, which made clear that, within the Eurozone, many Member States could not deal effectively with bank failures without putting into risk the sustainability of the entire Eurozone. EU’s reaction was imminent with the main constraint being, though, the wording of the Treaties. Creating EU agencies was one of the profound solutions towards the creation of Banking Union. Nevertheless, given the reticence of the European legislature, the CJEU and most scholars have sought for salvation in the 1958 Meroni ruling. The recent CJEU case law in Short Selling (CJEU, C-270/12) has pushed the debate forward by clarifying Meroni’s applicability to EU agencies and by providing the green light to vesting EU agencies with very significant powers. Despite the fact that the development of a single supervisory mechanism proved to be rather uncontroversial, the operation and the powers of the Single Resolution Board (the Board) seem to test the limits of the CJEU’s jurisprudence, indeed.

In this context, we examine the Board as an unprecedented form of agency and one of the cornerstones of the post-crisis European financial administration. Part I aims to briefly examine how the transition from traditional national schemes of administration to the extreme version of governance of the Board transpired. Part II examines the legal certainty of the SRB’s broad and discretionary powers and emphasises on crucial – to this end – aspects of its functioning. Part III discusses the controversial legal structure of the Single Resolution Fund (the Fund), which forms an integral part of the Board, and whether the arrangements therein constitute a threat to the efficiency that the Board aspires to achieve. We then conclude.

Keywords: Single Resolution Board, Single Resolution Fund, Legitimacy, Efficiency

JEL Classification: K22, K40