The Single Resolution Mechanism (SRM) for Europe’s Banks: How is the EU Commission’s proposal to be assessed?

In July this year, the European Commission presented plans for a Single Resolution Mechanism (SRM) as the third pillar of the banking union. Hartmut Koschyk, Federal Ministry of Finance, proposes the creation of a European system of national resolution funds instead of a centralized European resolution fund, which would have to be first built up by contributions from the financial sector. Thomas Gstädtner emphasises that a unified resolution settlement mechanism necessarily requires a stable legal foundation that is currently not provided by the European Treaties. For this reason, a prior amendment of the Treaties is necessary. For Tobias Tröger, University of Frankfurt am Main, in the current, on-going crisis, the SRM appears to be more like a “white ointment intended to show that recovery efforts are being made without addressing the actual cause”. Gunter Dunkel, German Association of Public Sector Banks, sees no legal basis for the establishment of a European resolution authority. He views the SRM regulation as a special form of over-regulation. In the opinion of Michael Kemmer, Association of German Banks, the proposal to establish a unified resolution mechanism and unified resolution funds for banks is a step along the way to achieving a banking union. Given the high level of cross-border networking of European credit institutions and the transnational effect of banking crises, this goal should be consistently pursued. However, although this matter is urgent some course corrections need to be made.