The Single Resolution Mechanism and the EU crisis management tools

Simon Gleeson

Chapter 12 in The European Banking Union and the Role of Law, 2019, pp 216-237 from Edward Elgar Publishing

Abstract: The EU framework for dealing with failing banks constitutes a complex trifurcated system: a bank that does not meet the conditions for resolution under BRRD/SRM may be subject to the applicable national corporate insolvency law, which may entail the granting of State aid subject to Commission approval. The resolution of an institution under BRRD/SRM may require the granting and approval of State aid at various stages. Moreover, in certain scenarios the granting of State aid outside the BRRD/SRM framework or the national corporate insolvency law regime remains an option. This paper argues that the operation of these parallel subsystems, with their different substantive entitlements and loss allocation cascades, invites potentially wrong deployment decisions resulting in undesirable distributional outcomes, contrary to the overall system goal of limiting taxpayers’ loss exposure to a minimum and tackling the ‘too-big-to-fail’ problem.

Keywords: Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2019
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