Time to address the shortcomings of the banking union (original) (raw)
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European Banking Union B: The Single Resolution Mechanism
SSRN Electronic Journal, 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.
Banking Union and European Perspectives on Resolution
Le traitement des difficultés des établissements bancaires et institutions financières. Approche croisée, Collection Actualités de droit de l’Entreprise., 2017
Banking Crises and Resolution in Europe currently fall within the wider mandatory framework known as the Banking Union, whose first blueprint was laid down in 2012 with the scope of realizing at European level the regulatory and institutional framework necessary for the stability of the banking sector. The creation of a Banking Union, based on a strong transfer of powers from the national authorities to the European institutions in different domains of the banking system and characterized by an intervention of maximum, rather than minimum, harmonization, was triggered by the financial crisis that hit the banking market repeatedly since 2008. Breaking with its previous regulatory approach to financial system governance, largely based on harmonization and focused on liberalization, the European Banking Union introduces a system which is executive and institutional. This paper focuses on the rationale for harmonization of rules on banking crises and examines the main tools of the so-called Resolution pillar of the Banking Union (the European Resolution Mechanism).
European Banking Union: Context, Structure, Challenges and Opportunities
EU Financial Regulation and Markets: Beyond Fragmentation and Differentiation, 2021
The European Banking Union (EBU) has had a complex strategic, political, economic and legal formation, and throughout the current turmoil there has been a special emphasis on preserving its stability and further development. The EBU formally consists of three interconnected pillars applicable to the euro area: (1) the Single Supervisory Mechanism (SSM) that encompasses European Central Bank’s (ECB) direct and indirect prudential supervision; (2) the Single Resolution Mechanism (SRM) that provides for a harmonized resolution framework; and (3) an envisaged safety net in the form of the European Deposit Insurance Scheme (EDIS). Additionally, the EBU is based on the common EU-wide Single Rulebook. A strong incentive for the EBU’s creation originated both from the repercussions of the global financial crisis and the European sovereign debt crisis. The EBU has experienced constant challenges from its very beginning, including the opposition to any indication of a transfer union, and criticism related to its design. Although progress is recommended on all elements, the most compelling is timely completion of the EDIS. From its inception, the EBU’s main goal has been to break the “vicious circle” between sovereigns and their banks – and that is in the focus of this article. Furthermore, this article explores the structure, achievements and inadequacies of the EBU pillars, and analyses potential threats and opportunities related to this segment of European integration.
EU Financial Regulation and Markets Beyond Fragmentation and Differentiation, 2020
The European Banking Union (EBU) has had a complex strategic, political, economic and legal formation, and throughout the current turmoil there has been a special emphasis on preserving its stability and further development. The EBU formally consists of three interconnected pillars applicable to the euro area: (1) the Single Supervisory Mechanism (SSM) that encompasses European Central Bank’s (ECB) direct and indirect prudential supervision; (2) the Single Resolution Mechanism (SRM) that provides for a harmonized resolution framework; and (3) an envisaged safety net in the form of the European Deposit Insurance Scheme (EDIS). A strong incentive for the EBU’s creation originated both from the repercussions of the global financial crisis and the European sovereign debt crisis. The EBU has experienced constant challenges from its very beginning, including the opposition to any indication of a transfer union, and criticism related to its design. Although progress is recommended on all elements, the most compelling is timely completion of the EDIS. From its inception, the EBU’s main goal has been to break the “vicious circle” between sovereigns and their banks – and that is in the focus of this article. Furthermore, this article explores the structure, achievements and inadequacies of the EBU pillars, and analyses potential threats and opportunities related to this segment of European integration.
An Integrated Financial Framework for the Banking Union: Don’t Forget Macro-Prudential Supervision
This essay reviews the sequencing of the functions of supervision, resolution, deposit insurance and the fiscal backstop in the Banking Union. All these functions deal with the soundness of individual banks. In the run-up to the 2007-2009 financial crisis, we overlooked the bigger picture of the stability of the wider financial system. This essay puts forward a concrete proposal for conducting macro-prudential policy in the prospective Banking Union. We suggest giving the lead on applying macro-prudential tools in the Banking Union to the ECB to foster a coherent approach, with important input from the national competent authorities to allow for much needed differentiation at the national level. Next, we argue that the ECB should separate the macro-prudential and microprudential functions. Otherwise, we may again be bogged down by the details of individual banks (micro), while losing sight of emerging imbalances in the wider financial system (macro).
represents an unprecedented transfer of sovereignty from participating Member States to an EU institution for conducting banking supervision and for delegating authority to an EU agency to have responsibility for the preparation, implementation and funding of a European bank resolution regime. The article examines the legal basis of the SSM in the Lisbon Treaty and considers whether the ECB's strong form of independence is appropriate for its role as a bank supervisor, and whether its limited powers to take macro-prudential regulatory and supervisory measures are adequate to ensure banking sector stability. The article further argues that the SRM provides an important institutional step to build a more effective European bank resolution framework, but it suffers from institutional weaknesses and legal uncertainty regarding the use of resolution tools that undermine its ability to manage a bank resolution. The article concludes that a more effective banking regulation and resolution regime in the Banking Union requires a sounder legal basis in the EU Treaty that would empower the ECB to have full powers to conduct macro-prudential supervision and to co-ordinate more with the Single Resolution Board (SRB) in the use of resolution powers, but subject to strict criteria established in law.
Varieties of Banking Union: Resolution Regimes and Backstops in Europe and the US
Rome, IAI, December 2018, 19 p. (IAI Papers ; 18|21), ISBN 978-88-9368-088-2, 2018
In both the EU and the US, the global financial crisis and the euro crisis triggered important changes to bank resolution frameworks. Bank resolution in both jurisdictions shares the objectives of making financial institutions resolvable without threatening financial stability, while protecting taxpayer money. But the different environments and different crisis features and experiences have led to different structures on the two sides of the Atlantic. While the US evolved towards remedying a blind spot within an already existing integrated system, Europe changed its approach from coordination to centralization.