The function of the single resolution mechanism (SRM) as central institution for bank resolution in the EU

• Date: 01 January 2018

Vol. 2 No. 1

January, 2018

European Journal of Economics, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

ISSN 2519-1284

Acces online at www.iipccl.org

76

The function of the single resolution mechanism (SRM) as central institution

for bank resolution in the EU

PhD (C.) Shkëlqesa Çitaku

Department of Financial Law, Faculty of Law, University of Pristina, Kosovo

Prof. Dr. Gazmend Luboteni

Department of Economics, Faculty of Economics, University of Pristina, Kosovo

Abstract

The paper aims to provide the comprehensive analyze on how the single resolution

mechanism works and its role in the process of the European Banking Sector integration. It is

evident that since 2008 the European Commission carried a number of initiatives to safe the

nancialsectorfrom crisesoccurredon somepartsof thebankingsectorOn thatbaseaer

theestablishmentofSinglesupervisingMechanismtheEUMemberStatesalsoagreedtohave

socalled resolutionmechanism forall its nancialactors topreserve nancialstabilityThe

purposewastotakemeasuressuch asseingrulesformanagingfailing banksandimprove

protection of depositors.

The paper will analyze the impact of the Single Resolution Mechanism of the European

BankingUnionEBUontheunifyingnationalbankresolutionandSingleResolutionfundto

be able to recapitalize banks directly when it fails.

Keywords: SRMSRBsingleresolutionfundbankingunion

Introduction

IntheEUreachedapoliticalagreementcreatingthesocalledSingleResolution

MechanismSRM andSingle ResolutionFundSRF inorder topreserve nancial

stability and to minimize direction of bail out from public nds and protect the

deposits.

The SRM was adopted on the basis of TFEU Article  regulation containing

uniform rules and procedure for resolution of credit institutions in the Member

States which have entered into a close cooperation with European Central Banks. The

creditinstitutions include nancial institutionsinvestment rms aswell as parent

institutions Until then for resolving failing banks the nancial contribution was

comingonlyfromEUMemberStatesinsteadofbanksitself

Under the Single Resolution Mechanism centralized decisionmaking power

in respect of resolution has been entrusted to the Single Resolution Board which

derivesits powers from boththe Bank Recovery andResolution Directive BRRD

and the Single Resolution Mechanism Regulation SRMR If a bank fails despite

stronger supervision the SRM allows bank resolution to be managed eectively

through a single resolution fund that is nanced by the banking sectorThe SRM

within Eurozone supplements common supervision and ensures resolution through

any bank crisis. Countries that will join Single Supervision Mechanism automatically