Gold Magazine January - February 2014, Issue 34 | Page 29
The Council’s position on the
Single Resolution Mechanism
On 18 December, the Council agreed a general approach on a Single Resolution Mechanism
(SRM), which is very far from the original
proposal made by the Commission in July
2013. The compromise of the Council consists
of a draft regulation on the SRM (to be negotiated with the European Parliament, see below),
and a commitment to negotiate an intergovernmental agreement by March 2014 on the
functioning of a Single Resolution Fund. We
believe that the agreement is complex and
might prove inefficient in overcoming financial
fragmentation and breaking the link between
sovereigns and banks in the first place. Mario
Draghi warned at the monetary hearing at the
European Parliament just a few days before the
Council agreed its position that “we should not
create a Single Resolution Mechanism that is
single in name only”, and added that the “decision making may become overly complex and
financing arrangements may not be adequate”.
The Resolution Authority
The resolution power would finally be granted
to a “Single Resolution Board” (SRB), consisting of an executive director, four full-time
appointed members and the representatives of
national resolution authorities of all member
states participating in the Banking Union (i.e.
euro area members plus those joining voluntarily). The SRB would be responsible for the
resolution of banks directly supervised by the
ECB (the large banks) as well as cross-border
banks, whatever their size. By contrast, national
resolution authorities would remain in charge
of the resolution of all other banks, unless the
resolution requires the involvement of the Single Resolution Fund (SRF), see below.
When a bank is failing, the board would adopt
a resolution, either on its own initiative, or following a notification by the ECB acting as the
Single Supervisor. The draft resolution would
be prepared in the executive format of the SRB,
i.e. the five permanent members and the representatives of the national resolution authority of the country where the bank is located.
However, any decision that would involve the
SRF under certain