Failing Banks within the Banking Union at the Crossroads : Taking Stock and Next Steps

Roughly eight years after the adoption of its legal basis, an assessment of the Single Resolution Mechanism remains difficult. With only one resolution case completed so far, a substantial part of the resolution framework has not yet been tested. While the recent inauguration of the European Stability Mechanism as provider of a “backstop” to the Single Resolution Fund has gone some way to enhance the institutional capacity of the Fund, significant technical and political impediments to the implementation of effective resolution actions continue to exist. Residual Non-Performing Loan problems in a number of participating Member States create an additional burden. Last not least, the co-existence of the SRM with highly diverse national approaches to addressing the failure of financial institutions has already proved to be the source of manifold problems, including, in particular, in cases where “significant” institutions are determined to be “failing or likely to fail”, but do not meet the “Public Interest” threshold for entry into resolution under the auspices of the SRM. The present Chapter takes stock of what has been achieved so far, in terms of both the preventive powers allocated to the Single Resolution Board’s and the actual resolution toolbox. Against this backdrop, it presents an assessment of the on-going reform debate regarding (a) the creation of a European Deposit Insurance System (EDIS) and (b) the further harmonisation of bank insolvency laws within the EU in general and the Banking Union in particular