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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).
2014
The present study examines the establishment of the final element of the ambitious European Banking Union project, i.e. the Single Resolution Mechanism (SRM), through the lens of two European Integration theories: Neofunctionalism (NF) and Liberal intergovernmentalism (LI). The research question was: “Why is there such a great gap between demand for and supply of a SRM with a centralized Resolution Authority and a Single Bank Resolution Fund (SBRF) at EU level and how can NF and LI explain the establishment of this crucial element of banking Union?” To answer it, a single case study and a congruence analysis were carried out. The qualitative research method of “content analysis” was adopted for data collection and analysis. Lastly, regarding the main findings, even though NF is successful at supplying part of the SRM, i.e. regulation with bail-in principle, the theory most successful at explaining the supply of regulation seems to be LI since the institutional set-up for the SRM was...
Regulatory aftermath of banking rescues: More Europe or business as usual?
euce.org
This paper analyzes the EU experience with the cross-border banking failures during the crisis and evaluates the post-crisis reform proposals in the light of this experience. It shows that the Commission considered substantive reforms that would shift the crossborder bank resolution regime to the EU level to match the operational presence of pan-European banks. However, the political compromises on the European System of Financial Supervisors in the Council, led the Commission to withdraw from more ambitious proposals in favor of gradual improvements of the pre-crisis status quo. The reformed structures are still too complex to be functional in real-time under the pressure of a financial crisis and they leave too many crucial issues such as sharing of information and of fiscal burdens in the domain of non-binding soft law agreements yet to be prepared by supervisory colleges. The new framework does not change the exclusively national accountability of supervisory authorities, thus the new regime is unlikely to prevent non-cooperative resolution strategies.
Hungarian Yearbook of International Law and European Law 2024, 2024
The regulation and supervision of the post-Great Financial Crisis banking market of the EU poses many challenges to the EU institutions and the Member States. After the establishment of the three European Supervisory Authorities (EBA, ESMA, EIOPA) in 2014, the first steps were made to create the European Banking Union (EBU), with its Single Supervisory Mechanism (SSM), Single Resolution Mechanism (SRM) and European Deposit Insurance Scheme (EDIS). In this article, we focus on the SRM, especially the incoherent application of the Single Rulebook by the Single Resolution Board (SRB), and other factors interfering with the decision-making, such as banking nationalism. We present three major cases from the SRB's-not so extensive-case law. The so-called Veneto Paradox draws attention to the problems caused by the incoherent interpretation of systemic importance in the EBU. The ABLV Latvia case discusses the connections between anti-money launde ring, prudential supervision and bank resolution. The MKB case emphasises the consequences of political influence in the banking sector.
Recovery and Resolution Regimes in the Banking Union
Modern Economy, 2021
This paper explores the implications of European Union (EU) legal regulations on approaches to tackling crisis situations in the financial sector. It explains the role and mechanisms of EU institutions in the process of monitoring and recovery of strategically important financial entities inside banking union at the EU level as well as of central bank members of the countries of the banking union. The purpose of the paper is to examine the compliance of EU regulations with national legislation in order to achieve preventive conditions of possible future crises and to protect national economies and the economy of the entire EU in context of the spillover effect and risks arising from the need of banks recovery due to realized losses of the same. The results evince the implementation of EU directives in the national legislation comprehensively, but practice demonstrated that the implementation of the same ones resulted in additional problems that require further EU institutions action...
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.
European Banking Union C: Cross-Border Resolution–Fortis Group
The Journal of Financial Crises, 2019
In August 2007, Fortis Group, Belgium's largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis's situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis's CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis's Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing, systemically important financial institution, analysis of why the effort failed, and consideration of how it might proceed differently under current regulations.
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.
Time to address the shortcomings of the banking union
Frankfurt a. M.: Leibniz Institute for Financial Research SAFE, 2020
Discussions about the banking union have restarted. Its success so far is limited: national banking sectors are still overwhelmingly exposed to their own countries' economies, cross border banking has not increased and capital and liquidity remain locked within national boundaries. The policy letter highlights that the current debate, centered on sovereign exposures and deposit insurance, misses critical underlying problems in the supervision and resolution frameworks. The ECB supervisors' efforts to facilitate cross-border banking have been hampered by national ringfencing. The resolution framework is not up to its task: limited powers of the SRB, prohibitive access conditions and limited size of the Single Resolution Fund limit its effectiveness. A lack of a coherent European framework for insolvency unlevels the regulatory field and creates incentives to bypass European rules. The new Commission and European Parliament, with the new ECB leadership, provide a unique opportunity to address these shortcomings and make the banking union work.