Single bank resolution mechanism

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Regulation (EU) No. 806/2014

Title: Regulation (EU) No. 806/2014 of the European Parliament and of the Council of July 15, 2014 laying down uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms within the framework of a single resolution mechanism and a single resolution fund and amending the regulation (EU) No. 1093/2010
Designation:
(not official) 		Single bank resolution mechanism
Legal matter: Finance law
Date of issue: 15th July 2014
Release date: July 30, 2014
Come into effect: 19th August 2014
To be used from: December 31, 2018
Full text Consolidated version (not official)
basic version
Regulation has entered into force and is applicable.
Please note the information on the current version of legal acts of the European Union !

The Single Resolution Mechanism , also the European Single Resolution Mechanism (SRM abbreviation for Single Resolution Mechanism ), is an EU regulation with the full name (EU) No. 806/2014 of the European Parliament and of the Council of July 15, 2014 to establish uniform regulations and a uniform procedure for the resolution of credit institutions and certain investment firms within the framework of a uniform resolution mechanism and a uniform resolution fund, as well as amending Regulation (EU) No. 1093/2010 .

With this ordinance, uniform rules for the orderly resolution or restructuring of illiquid European banks have been in effect since January 1, 2015 . This is the second central pillar of the European banking union ; The SRM supplements the uniform banking supervisory mechanism (SSM for Single Supervisory Mechanism ), through which the European Central Bank (ECB) has been uniformly supervising large banks in the euro zone since autumn 2014 .

backgrounds

Due to the negative experiences of the global financial crisis from 2007 and the euro crisis from 2009, efforts in the European Union to strengthen uniform regulation of the European financial markets increased . As a result, the European System of Financial Supervision was established in 2011 with three European Financial Supervisory Authorities for banking ( EBA ), insurance ( EIOPA ) and securities ( ESMA ). The system stipulated that the regulation of the financial markets would largely be decided at European level, but compliance with the standards would continue to be monitored primarily by the national supervisory authorities of the EU countries. As a result of further developments, in particular the sovereign debt crisis in Cyprus since 2011, when the national banking supervisory authority had not responded adequately to the crisis, the newly established system of European financial supervision has already been called into question again.

On December 13, 2012, the European finance ministers agreed on key points for the creation of a uniform banking supervision under the umbrella of the ECB. At the EU summit of the 27 heads of state and government, it was also decided by June 2013 to draw up specific proposals for a joint fund for the resolution of illiquid banks and for deposit protection. On July 10, 2013, the European Commission presented its proposals for a single bank resolution mechanism. On December 18, 2013, the finance ministers of the euro zone agreed on a common position on the design of the resolution mechanism, which materializes in two instruments:

  • Settlement Directive (BRRD abbreviation) - it defines the uniform settlement rules for all banks throughout the EU
  • Uniform bank resolution mechanism (SRM) - it designs the resolution rules (based on the resolution directive) for the major banks in the euro zone and has a joint fund to finance proper bank resolution.

On April 15, 2014, the legal basis was formally adopted by the European Parliament.

Organization and functioning

The uniform bank resolution mechanism basically extends to the big banks that were placed under the supervision of the ECB in the uniform supervisory mechanism from autumn 2014. The number of major banks supervised by the ECB is 120 (as of October 2014). The other institutions, including the majority of the savings banks and Volksbanks in Germany and all EU banks in non-euro countries, are processed by national authorities in an emergency according to the uniform rules of the settlement directive. The SRM therefore only applies to the countries of the euro zone; Non-euro countries can participate voluntarily.

The SRM consists of the single resolution board (SRB) and the single resolution fund (SRF).

The resolution body

The resolution board (English Single Resolution Board , abbreviated as SRB), based in Brussels, is an agency of the European Union and decides on the use of the funds of the fund; the use of the funds is conditional on the proper resolution of an affected bank according to the principles of the European resolution directive under the supervision of the SRB. The SRB consists of an Executive Director ( Elke König ), his deputy (Timo Löyttyniemi), four full-time members and representatives of the national resolution authorities; the Commission and the ECB will, contrary to what was originally intended, only be observers and not members. The authority attached to the SRB had 250 employees at the end of 2017 and wants to increase the number of employees to 436 by 2020.

In principle, in its capacity as banking supervisor, the ECB assesses the sustainability of a bank. If it discovers that a bank has got into dangerous difficulties, the SRB meets to work out the modalities for resolution or recovery. The EU Commission can approve or reject the vote of the body and should also inform the Council of Ministers. The process should be initiated within 24 hours if the EU Commission and member states do not raise an objection.

The resolution fund

If the funds of a bank's shareholders, creditors and large depositors are insufficient to properly wind up a distressed bank, the Single Resolution Fund (SRF), under the guidance of the SRB, can step in. For the SRM states, the SRF replaces the national resolution financing mechanisms ( e.g. SoFFin in Germany). As in the Federal Republic of Germany, the target value for the funding of the SRF is 1 percent of the protected deposits, as of mid-2014 around 55 billion euros, which are to be built up within eight years. The obligation to contribute includes all banks established in the SRM states, regardless of whether they are under the direct supervision of the ECB or a national authority in the SSM.

As a result, the SRF will pool liability for bank failures by 2023. In order to roughly synchronize the Europeanization of liability with the Europeanization of controls, the concept provides for a gradual transition to resolution financing at European level. For a transitional period of eight years, the SRF will remain subdivided into national chambers, which are fed from contributions from the banks of the respective countries. The extent to which the various national chambers can be used to wind up a bank is limited: if 100% of these chambers can still be used up in the first year, this percentage drops to 60% in the second year, to 40% in the third year and then continues linearly . Once this upper limit has been reached, in a second stage there is recourse to the chambers of all other member states, which is also limited, including those in which the bank concerned was not active. The percentage for the permissible level of use of these chambers increases gradually. The consequence of this process is that after the transitional period there is no longer any differentiation between national chambers and liability is completely communitized. The chambers are thus ultimately dissolved in favor of a single fund.

reception

That the Italian bank Banca Monte dei Paschi di Siena , which got into extreme difficulties in 2016, with EU permission from the Italian state citing the "precautionary bank recapitalization" - which was expressly intended only in the event of the "danger of a serious financial crisis" - was saved with taxpayers' money, many critics consider it a clear breach of EU regulations. The German historian Rainer Zitelmann judged "The rescue of the Banca Monte dei Paschi shows once again the Italianization of Europe".

Web links

Official explanations:

Critical questions:

Individual evidence

  1. ^ Spiegel.de: EU only creates part of the banking union
  2. ↑ europa.eu: Commission proposes a single resolution mechanism for the banking union
  3. ↑ Spiegel.de: Euro finance ministers agree on bank resolution
  4. ↑ europarl.europa.eu: Single banking supervision and single resolution mechanism
  5. ↑ The start of the banking union - the single supervisory mechanism in Europe. (pdf) In: Monthly Report October 2014. Deutsche Bundesbank, October 2014, p. 48 , accessed on July 1, 2016 .
  6. ↑ [1] srb.eurpa.eu: Mission
  7. ↑ Single Resolution Board (Ed.): SRB Multi-Annual Planning and Work Program 2018 . Publications Office of the European Union, Luxembourg 2017, ISBN 978-92-95211-13-1 (English, online [PDF; 2.8 MB ; accessed on August 25, 2018]). Here p. 46.
  8. ^ Sven Giegold: EU Commission approves the rescue of the Monte dei Paschi: blatant breach of the rules of the banking union. July 4, 2017, accessed August 13, 2018 .
  9. ↑ Dirk Meyer: European Safe Bonds - Mutualization on installments. In: Ludwig Erhard Foundation. July 14, 2017, accessed August 13, 2018 .
  10. ^ Rainer Zitelmann: Banca Monte dei Paschi as a fatal example. In: Börse am Sonntag. January 1, 2017, accessed August 13, 2018 .