Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-745bb68f8f-kw2vx Total loading time: 0 Render date: 2025-01-12T23:25:05.774Z Has data issue: false hasContentIssue false

25 - Failing Banks within the Banking Union at the Crossroads

A Great Step Forward, with Many Loose Ends

from Part IV - Financial Integration

Published online by Cambridge University Press:  28 September 2023

By
Jens-Hinrich Binder
Edited by
Dariusz Adamski ,
Fabian Amtenbrink  and
Jakob de Haan
Dariusz Adamski
Affiliation:
University of Wroclaw
Fabian Amtenbrink
Affiliation:
Erasmus Universiteit Rotterdam
Jakob de Haan
Affiliation:
University of Groningen
Get access

Summary

The creation of the Single Resolution Mechanism has dramatically changed the approach to dealing with failing large banks in eurozone countries. Within this new framework, the Single Resolution Board has assumed core decision-making powers with regard to (a) certain preventive measures, (b) the assessment of resolvability with corresponding powers to require banks to adopt changes with regard to, inter alia, funding arrangements, business activities, or even corporate structures, and (c) the initiation and calibration of resolution tools in relation to actual resolution cases. Significantly, as part of its preventive powers, the SRB is also responsible for the development of institution-specific ‘minimum requirements on own funds and eligible liabilities’, which seek to ensure that each institution holds a sufficient base of capital instruments and other instruments eligible for the allocation of losses to investors. Moreover, a Single Resolution Fund has been established, which is funded through mandatory contributions by credit institutions and designed to satisfy a broad range of funding needs in relation to resolution actions. Against that backdrop, this chapter critically assesses what has been accomplished so far in institutional, procedural, and substantive terms, and identifies major areas of concern for further reforms.

Type
Chapter
Information
The Cambridge Handbook of European Monetary, Economic and Financial Integration , pp. 459 - 477
Publisher: Cambridge University Press
Print publication year: 2023

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aerz, J., and Bizarro, P. (2020). The reform of the European Stability Mechanism. Capital Markets Law Journal 15, 159–174.Google Scholar
BCBS (Basel Committee on Banking Supervision) (2010). Report and Recommendations of the Cross-border Bank Resolution Group. March 2010. www.bis.org/publ/bcbs169.pdfGoogle Scholar
Binder, J.-H. (2015a). The European Banking Union – Rationale and key policy issues. In Binder, J.-H. and Gortsos, C. (eds.), Banking Union: A Compendium. Baden-Baden: Nomos, pp. 1–16.CrossRefGoogle Scholar
Binder, J.-H. (2015b). The Banking Union and the governance of credit institutions. European Business Organization Law Review 16, 469–490.Google Scholar
Binder, J.-H. (2016a). Resolution planning and structural bank reform within the Banking Union. In Castaňeda, J. E., Mayes, D. G., and Wood, G. (eds.), European Banking Union: Prospects and Challenges. London: Routledge, pp. 129–155.Google Scholar
Binder, J.-H. (2016b). Resolution: Concepts, requirements, and tools. In Binder, J.-H. and Singh, D. (eds.), Bank Resolution: The European Regime. Oxford: Oxford University Press, pp. 25–59.Google Scholar
Binder, J.-H. (2016c). The position of creditors under the BRRD. In Bank of Greece (ed.), Commemorative Volume for Leonidas Georgakopoulos, Vol. 1. Athens: Bank of Greece, pp. 37–61.Google Scholar
Binder, J.-H. (2019). The relevance of the resolution tools within the single resolution mechanism. In Chiti, M. P. and Santoro, V. (eds.), The Palgrave Handbook of European Banking Union Law. Cham: Palgrave Macmillan, pp. 299–320.CrossRefGoogle Scholar
Binder, J.-H. (2020). Proportionality at the resolution stage: Calibration of resolution measures and the public interest test. European Business Organization Law Review 21, 453–474.Google Scholar
Binder, J.-H. (2021). Towards harmonised frameworks for the liquidation of non-systemically relevant credit institutions in the EU? A discussion of policy choices and potential impediments. European Company and Financial Law Review 18, 555–587.Google Scholar
Binder, J.-H. (2022). Art. 26 SRMR. In Binder, J. H., Gortsos, C., Lackhoff, K., and Ohler, C. (eds.), Brussels Commentary European Banking Union. Baden-Baden: Nomos, pp. 759–762.CrossRefGoogle Scholar
Binder, J.-H., Krimminger, M., Nieto, M., and Singh, D. (2019). The choice between judicial and administrative sanctioned procedures to manage liquidation of banks: a transatlantic perspective. Capital Markets Law Journal 14, 178–216.Google Scholar
Brescia Morra, C. (2019). The third pillar of the banking union and its troubled implementation. In Chiti, M. P. and Santoro, V. (eds.), The Palgrave Handbook of European Banking Union Law. Cham: Palgrave Macmillan, pp. 393–407.Google Scholar
Brescia Morra, C., et al. (2021). Non-performing loans – New risks and policies? What factors drive the performance of national asset management companies? Study requested by the ECON Committee of the European Parliament. www.europarl.europa.eu/RegData/etudes/STUD/2021/651390/IPOL_STU(2021)651390_EN.pdfGoogle Scholar
Buch, C. and Weigert, B. (2012). Legacy problems in transition to a banking union. In Beck, T. (ed.), Banking Union for Europe: Risks and Challenges. Brussels: Centre for Economic Policy Research, pp. 25–35.Google Scholar
Busch, D. (2020). Governance of the single resolution scheme. In Busch, D. and Ferrarini, G. (eds.), European Banking Union, 2nd ed. Oxford: Oxford University Press, pp. 343–401.Google Scholar
Colaert, V. and Bens, G. (2020). European Deposit Insurance System (EDIS) – Cornerstone of the banking union or dead end? In Busch, D. and Ferrarini, G. (eds.), European Banking Union, 2nd ed. Oxford: Oxford University Press, pp. 541–575.Google Scholar
De Aldisio, A., et al. (2019). Towards a framework for orderly liquidation of banks in the EU. Banca d’Italia Notes on Financial Stability and Supervision No. 15. www.bancaditalia.it/pubblicazioni/note-stabilita/2019-0015/Note-stabilita-finanziaria-n15.pdf?language_id=1Google Scholar
Di Goia-Callabrese, P. (2021). Bail-in: Do Italians do it better (or worse, or not at all)? European Business Law Review 32, 93–116.Google Scholar
Deloitte (2017). Hippocrates Provisional Report (Sale of Business Scenario). [i.e. provisional valuation report in relation to Banco Popular], 6 June . www.srb.europa.eu/system/files/media/document/Valuation%202%20report%20-%20Hippocrates%20Provisional%20Valuation%20Report.pdfGoogle Scholar
Demirgüç-Kunt, A., and Detragiache, E. (2002). Does deposit insurance increase banking system stability? An empirical investigation. Journal of Monetary Economics 49, 1373–1406.CrossRefGoogle Scholar
Donnelly, S., and Asimakopoulos, I. G. (2019). Bending and breaking the single resolution mechanism: The case of Italy. Journal of Common Market Studies 57 1–16.Google Scholar
ECA (European Court of Auditors) (2017). Special Report – Single Resolution Board: Work on a challenging Banking Union task started, but still a long way to go. www.eca.europa.eu/lists/ecadocuments/sr17_23/sr_srb-bu_en.pdfGoogle Scholar
ECA (2021). Special Report – Resolution planning in the Single Resolution Mechanism. www.eca.europa.eu/lists/ecadocuments/sr21_01/sr_single_resolution_mechanism_en.pdfGoogle Scholar
European Commission (2015). Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 806/2014 in order to establish a European Deposit Insurance Scheme, COM(2015) 586 final, 24 November.Google Scholar
European Commission (2017). European Commission, Decision: State Aid SA. 45664 (2017/N) – Italy – Orderly liquidation of Banca Popolare di Vicenza and Veneto Banca – Liquidation aid (25 June 2017), C(2017) 4501 final.Google Scholar
European Commission (2018a). Proposal for a Directive of the European Parliament and of the Council on credit servicers, credit purchasers and the recovery of collateral, COM(2018) 135 final.Google Scholar
European Commission (2018b). Commission Staff Working Document: ‘AMC Blueprint’ of 14 March 2018 (SWD(2018) 72 final.Google Scholar
European Parliament (2019). In-depth analysis: Liquidation of banks: Towards an ‘FDIC’ for the Banking Union? February. www.europarl.europa.eu/RegData/etudes/IDAN/2019/634385/IPOL_IDA(2019)634385_EN.pdfGoogle Scholar
Ferrarini, G., and Piantelli, A. M. (2020). Bank resolution in practice – Analysis of early European cases. In Busch, D. and Ferrarini, G. (eds.), European Banking Union, 2nd ed. Oxford: Oxford University Press, pp. 475–511.Google Scholar
Fonteyne, W., et al. (2010). Crisis management and resolution for a European banking system. IMF Working Paper WP/10/70. www.imf.org/external/pubs/ft/wp/2010/wp1070.pdfGoogle Scholar
FSB (Financial Stability Board) (2011/2014). Key attributes of effective resolution regimes for financial institutions. October. www.financialstabilityboard.org/publications/r_111104cc.pdf; updated October 2014 www.financialstabilityboard.org/wp-content/uploads/r_141015.pdfGoogle Scholar
Gardella, A. (2020). Bail-in: Preparedness and execution. In Busch, D. and Ferrarini, G. (eds.), European Banking Union, 2nd ed. Oxford: Oxford University Press, pp. 451–474.Google Scholar
Gelpern, A., and Véron, N. (2019). An effective regime for non-viable banks: US experience and considerations for EU reform – Banking union scrutiny. Study requested by the ECON Committee of the European Parliament. www.europarl.europa.eu/RegData/etudes/STUD/2019/624432/IPOL_STU(2019)624432_EN.pdfGoogle Scholar
Gortsos, C. (2022a). Introduction to Arts. 67–74 SRMR. In Binder, J. H., Gortsos, C., Lackhoff, K., and Ohler, C. (eds.), Brussels Commentary European Banking Union. Baden-Baden: Nomos, pp. 1075–1084.Google Scholar
Gortsos, C. (2022b). Art. 74 SRMR. In Binder, J. H., Gortsos, C., Lackhoff, K., and Ohler, C. (eds.), Brussels Commentary European Banking Union. Baden-Baden: Nomos, pp. 1112–1119.Google Scholar
Gros, D., and Schoenmaker, D. (2014). European deposit insurance and resolution in the banking union. Journal of Common Market Studies 52, 529–546.Google Scholar
Grünewald, S., and Louisse, M. (2022). How asset management companies can help tackle the NPL crisis – A state aid perspective within the resolution framework. EBI Working Paper No. 109. https://ssrn.com/abstract=3999059Google Scholar
Hadjiemmanuil, C. (2017). Limits on state-funded bailouts in the EU bank resolution regime (2017). European Banking Institute Working Paper Series 2017 No. 2. https://ssrn.com/abstract=2912165Google Scholar
Haentjens, M. (2022). Arts. 12–12k SRMR. In Binder, J. H., Gortsos, C., Lackhoff, K., and Ohler, C. (eds.), Brussels Commentary European Banking Union. Baden-Baden: Nomos, pp. 570–604.Google Scholar
Huertas, T. (2021). Reset required: The euro area crisis management and deposit insurance framework. SAFE White Paper No. 85. https://safe-frankfurt.de/fileadmin/user_upload/editor_common/Policy_Center/SAFE_White_Paper_85.pdfCrossRefGoogle Scholar
Kleftouri, N. (2015). Deposit Protection and Bank Resolution. Oxford: Oxford University Press.Google Scholar
Lamandini, M., and Ramos Muňoz, D. (2019). Minimum requirement for own capital and eligible liabilities. In Chiti, M. P. and Santoro, V. (eds.), The Palgrave Handbook of European Banking Union Law. Cham: Palgrave Macmillan, pp. 321–348.Google Scholar
Lamandini, M., Lusignani, G., and Muňoz, D. R. (2018). Does Europe have what it takes to finish the banking union? Columbia Journal of European Law 24, 233–289.Google Scholar
Laviola, S. (2021). System-wide events in the Public Interest Assessment. The SRB blog, 31 May. www.srb.europa.eu/en/content/system-wide-events-public-interest-assessmentGoogle Scholar
Laviola, S. (2022). The public interest assessment and bank-insurance contagion. The SRB blog, 26 January. www.srb.europa.eu/en/content/public-interest-assessment-and-bank-insurance-contagionGoogle Scholar
Miglionico, A. (2018). Rescuing failing banks for financial stability: The unintended outcomes of bail-in rules. International Company and Commercial Law Review 29(10), 608–617.Google Scholar
Morais, L. S. (2019). Lessons from the first resolution experiences in the context of banking recovery and resolution directive. In Chiti, M. P. and Santoro, V. (eds.), The Palgrave Handbook of European Banking Union Law. Cham: Palgrave Macmillan, pp. 371–391.CrossRefGoogle Scholar
Restoy, F., Vrbaski, R., and Walters, R. (2020). Bank failure management in the European banking union: What’s wrong and how to fix it. Financial Stability Institute Occasional Paper No. 15. www.bis.org/fsi/publ/insights10.pdfGoogle Scholar
Santoro, V., and Mecatti, I. (2019). Write-down and conversion of capital instruments. In Chiti, M. P. and Santoro, V. (eds.), The Palgrave Handbook of European Banking Union Law. Cham: Palgrave Macmillan, pp. 349–370.Google Scholar
Schillig, M. (2016). Resolution and Insolvency of Banks and Financial Institutions. Oxford: Oxford University Press.CrossRefGoogle Scholar
Schillig, M. (2020). EU bank insolvency law harmonisation: What next? International Insolvency Review 30( 2), 1–28.Google Scholar
Sciascia, G. (2020). Expanding the scope of the EU BRR framework: An administrative receivership for the banking union. https://ssrn.com/abstract=3748525Google Scholar
SRB (2016). The single resolution mechanism: Introduction to resolution planning. September. www.srb.europa.eu/system/files/media/document/intro_resplanning.pdf.pdfGoogle Scholar
SRB (2017a). Single Resolution Board, Decision of the Single Resolution Board in its executive session of 7 June 2017 concerning the adoption of a resolution scheme in respect of Banco Popular Español, S.A., … Addressed to FROB (SRB/EES/2017/08) (non-confidential version). https://srb.europa.eu/sites/srbsite/files/resolution_decision.pdfGoogle Scholar
SRB (2017b). Decision of the Single Resolution Board in its executive session of 23 June 2017 concerning the assessment of the conditions for resolution in respect of Veneto Banca S.p.A. … addressed to Banca d’Italia in its capacity as National Resolution Authority (SRB/EES/2017/11) (non-confidential version). https://srb.europa.eu/sites/srbsite/files/srb-ees-2017-11_non-confidential.pdfGoogle Scholar
SRB (2017c). Decision of the Single Resolution Board in its executive session of 23 June 2017 concerning the assessment of the conditions for resolution in respect of Banca Popolare di Vicenza S.p.A. … addressed to Banca d’Italia in its capacity as National Resolution Authority (SRB/EES/2017/12) (non-confidential version). https://srb.europa.eu/sites/srbsite/files/srb-ees-2017-12_non-confidential.pdfGoogle Scholar
SRB (2018a). Single Resolution Board, Notice summarising the decision taken in respect of ABLV Bank, AS. https://srb.europa.eu/sites/srbsite/files/20180223-summary_decision_-_latvia.pdfGoogle Scholar
SRB (2018b). Single Resolution Board, Notice summarising the decision taken in respect of ABLV Bank Luxembourg S.A. https://srb.europa.eu/sites/srbsite/files/20180223_summary-decision_-_luxembourg.pdfGoogle Scholar
SRB (2019). Decision of the Single Resolution Board of 15 August 2019 concerning the assessment of the conditions for resolution in respect of AS PNB (SRB/EES/2019/131). www.srb.europa.eu/system/files/media/document/non-confidential_version_of_the_resolution_decision_in_relation_to_as_pnb_banka.pdfGoogle Scholar
SRB (2021a). 2021 resolution planning cycle (RPC) booklet. www.srb.europa.eu/system/files/media/document/srb_rpc_booklet_2021.pdfGoogle Scholar
SRB (2021b). Annual report 2020. www.srb.europa.eu/system/files/media/document/Annual%20Report%202020_Final_web.pdfGoogle Scholar
SRB (2022a). Notice summarising the decision taken in respect of Sberbank banka d.d. www.srb.europa.eu/system/files/media/document/20220103%20SRB%20Notice%20summarising%20the%20decision%20taken%20in%20respect%20of%20Sberbank%20banka%20d.d..pdfGoogle Scholar
SRB (2022b). Notice summarising the decision taken in respect of Sberbank d.d. www.srb.europa.eu/system/files/media/document/20220103%20SRB%20Notice%20summarising%20the%20decision%20taken%20in%20respect%20of%20Sberbank%20d.d._0.pdfGoogle Scholar
Stanghellini, L. (2016). The implementation of the BRRD in Italy and its first test: Policy implications. Journal of Financial Regulation 2, 154–161.Google Scholar
Teixeira, P. G. (2020). The Legal History of the European Banking Union. Oxford: Hart Publishing.Google Scholar
Tröger, T., and Kotovskaia, A. (2022): National interests and supranational resolution in the European Banking Union. SAFE Working Paper No. 340 / EBI Working Paper No. 114. https://ssrn.com/abstract=4024343Google Scholar
VVA, Grimaldi and Bruegel (2019). Study on the differences between bank insolvency laws and on their potential harmonisation – Final report (commissioned by the European Commission). https://finance.ec.europa.eu/document/download/dd2e21c2-f56a-4126-8b4f-4aa8f1fe5e9a_en?filename=191106-study-bank-insolvency_en.pdfGoogle Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×