Single Resolution Mechanism
The Single Resolution Mechanism (SRM) is the European system for resolving non-viable banks.
Within the SRM, the responsibility for the resolution of credit institutions is shared between the Single Resolution Board and the national resolution authorities in euro area Member States – including Banco de Portugal – and in other European Union countries which choose to join the Banking Union.
The SRM also comprises the Single Resolution Fund. Financed by the banking sector, this fund is intended to support the resolution of banks which are failing or likely to fail, after other options, such as the bail-in tool, have been exhausted.
The SRM became operational on 1 January 2016.
Why is the SRM important?
The SRM’s purpose is to ensure an orderly resolution of failing banks with minimal costs to taxpayers and to the real economy.
The SRM was designed to ensure a common approach for dealing with failing banks and thus strengthen confidence in the banking sector and promote the integration of the internal market for financial services.
Which countries participate?
All euro area countries participate automatically in the SRM.
The SRM will also include the European Union Member States that do not have the euro as their currency and which choose to join the Single Supervisory Mechanism Single Supervisory Mechanism.
How does the SRM work?
The Single Resolution Board:
- decides on resolution schemes for failing banks, which include the application of resolution tools and the use of the Single Resolution Fund;
- is directly responsible for the planning and resolution phases of cross-border banks and the banks of the Banking Union, which are supervised directly by the European Central Bank under the Single Supervisory Mechanism;
- is responsible for all resolution cases, irrespective of the size of the bank, if resolution requires recourse to the Single Resolution Fund.
The national resolution authorities of participating Member States – including Banco de Portugal – are responsible for planning and adopting resolution plans for banks which do not fall under the direct responsibility of the Single Resolution Board.
Nevertheless, the Single Resolution Board may at any time decide to exercise its powers in respect of any bank in the Banking Union, irrespective of its size.
In addition to the Single Resolution Board and the national resolution authorities, the following entities also participate in the SRM:
The Council of the European Union, which appoints the members of the Single Resolution Board, determines how the contributions to the Single Resolution Fund are to be made by the banking sector, and may, in certain cases, object to a particular resolution scheme;
The European Commission, which endorses the resolution schemes adopted by the Single Resolution Board.