What the EU is doing and why
Resolution is the orderly restructuring of a bank by a resolution authority when the bank is failing or likely to fail. This procedure ensures that a bank failure does not harm the broader economy or cause financial instability.
The single resolution mechanism (SRM) applies to banks covered by the single supervisory mechanism. It is the second component, or ‘pillar’, of the banking union.
If a bank fails despite stronger supervision, the SRM allows bank resolution to be managed effectively through
- a single resolution board
- a single resolution fund that is financed by the banking sector
The purpose of the SRM is to ensure an orderly resolution of failing banks with minimal costs for taxpayers and to the real economy.
Single resolution board (SRB)
The single resolution board, established by the SRM regulation, is a fully independent EU agency acting as the central resolution authority within the banking union. Together with the national resolution authorities of participating countries, it forms the SRM.
The role of the SRB is to
- ensure the orderly resolution of failing banks with minimum impact on the real economy and the public finances of banking union countries
- manage the single resolution fund
Policy making timeline
- 18 April 2023Legislative proposal - Single resolution mechanism
- 30 April 2019Report - Single resolution mechanism regulation
- 6 December 2017Roadmap - Backstop for the Single Resolution Fund
Proposal – in the framework of the roadmap for deepening Europe's Economic and Monetary Union – that the future European Monetary Fund serves as a backstop for the Single Resolution Fund.
- 23 November 2016Legislative proposal - Single resolution mechanism
The SRM regulation establishes the framework for the resolution of banks in EU countries participating in the banking union.
- Text of the SRM Regulation (806/2014/EU)
- Summary of the legislation: Failing banks and investment firms: rules and procedures