Single Resolution Mechanism
The Single Resolution Mechanism (SRM) is one of the pillars of the Banking Union, together with the Single Supervisory Mechanism and the European Deposit Insurance Scheme, which is pending creation. The SRM guarantees the orderly resolution of those banks which are no longer viable and minimizes the associated costs for taxpayers and real economy.
The SRM is formed by the national resolution authorities (NRAs), the Single Resolution Board (SRB) and the Single Resolution Fund (SRF). The SRM was created by Regulation (EU) No 806/2014 establishing a SRMR. The SRM centralizes the decision-making process regarding the resolution of entities in the European scope and guarantees harmonized resolution financing practices.
The main goals of the SRM are to safeguard financial stability, minimize the effects of individual bank crises on the economic system, limit the dependency on public financial support, and ensure a level playing field in resolution for all banks in the Euro zone.
The scope of application of the SRM includes all banking institutions covered by the Single Supervisory Mechanism.
National Resolution Authorities
The Bank Recovery and Resolution Directive allows Member States to choose between centralizing all resolution functions in a single resolution authority or distributing these functions among several authorities. Spain chose the latter option and assigned preventive resolution functions to the Banco de España, in a manner that is hierarchically and functionally independent from the supervising authority and the National Securities Market Commission. Executive resolution functions have been assigned to the FROB. As established in Law 11/2015 (1 MB), both institutions need to collaborate and provide each other with as much information as it is required to perform their respective functions. To this effect, the Banco de España and the FROB have entered into a Collaboration Agreement regarding the recovery and resolution of credit institutions, which was published on February 21, 2018.
- Entities under the Banco de España’s remit (11 KB). The Banco de España, as the preventive resolution authority, is responsible for the non cross-border less significant institutions. Likewise, the Banco de España collaborates with the SRB on those tasks assigned regarding to significant institutions that are directly under the SRB’s remit.
Resolution authority at European level
At European level, Regulation (EU) No 806/2014 establishing a SRMR establishes that the SRB shall be responsible for preparing all resolution plans and adopting all decisions related to the resolution of significant institutions and groups and other cross-border groups within the Euro zone; and NRAs have the same functions with respect to all other entities and groups. However, the SRB may delegate certain functions that were originally its competence to the NRAs. Therefore, the Banco de España has a double scope of intervention, having direct competence over the less significant institutions, and also cooperating in the tasks assigned by the SRB regarding the significant institutions, coordinating their actions with the SRB.
- Entities under the SRB’s remit: significant institutions and groups and cross-border entities.