SRM breakthrough fosters confidence and stability

srm enews

The EBF welcomed the trilogue agreement on the Single Resolution Mechanism (SRM) that was reached in Brussels on Thursday 20 March, after an all-night negotiating marathon. This historic breakthrough will provide improved clarity and efficiency for the decisions to be made under the new mechanism that determines whether Eurozone banks need to be placed into resolution.

Europe’s banks consider it important to have an efficient decision-making process for resolving banks. Clarity is indeed essential in order to minimise the impact of a bank failure and avoid the need for taxpayers’ support.

If implemented correctly, this mechanism will further help to break the link between government debt crises and the banking sector and provide an effective and credible common crisis management framework for supervised banks. It will consequently serve to strengthen confidence and stability in the financial markets and complements the Single Supervisory Mechanism in the Banking Union framework.

The banking industry particularly welcomes the autonomy of the Single Resolution Board to make clear and predictable decisions on how to resolve failing banks. However, it is convinced this process should apply to all resolutions. While supporting the creation of the Single Resolution Fund, the fact that the build-up period of eight years for the fund differs from the ten years that is allowed in the Bank Recovery and Resolution Directive (BRRD) places an heavier burden on banks inside the SSM and may result in competitive distortions in the single market, especially since those new requirements come on top of other obligations that the banking sector must fulfil under recent regulatory reform measures.
The deal will now be tabled for a vote at the second plenary session in April, the last of this legislature. The Council needs to approve for the measures to be in place by 2015 and the fund operational from 2016.

EBF contact: t.buenker@ebf-fbe.eu