04-01-16

"Taxpayers to be protected from having to bail out banks if they go bust"

The Single Resolution Mechanism (SRM) has become fully operational on 1 January 2016

EU's Hill: Private investors will be bailed in

The Single Resolution Mechanism (SRM) has become fully operational on 1 January 2016, the EU Commission said in a press statement. The SRM implements the EU-wide Bank Recovery and Resolution Directive (BRRD) in the eurozone. The full resolution powers of the Single Resolution Board (SRB) will also apply as of 1 January 2016.

Instead of a bank being bailed out by taxpayers, it will now be for the private investors in a bank to be bailed in. “This means that we now have a system for resolving banks and of paying for resolution so that taxpayers will be protected from having to bail out banks if they go bust,” EU Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union, said. “No longer will the mistakes of banks have to be borne on the shoulders of the many,” Hill stressed. cep financial market expert Bert Van Roosebeke agrees: “It’s the logical decision to have investors sharing the burden in bank resolutions as a basic principal.”

The SRM provides that the Single Resolution Fund (SRF) will be built up over a period of eight years with 'ex-ante' contributions from the banking industry. Member States agreed to define some of the rules, particularly relating to the transfer of those contributions from National Resolution Authorities to the SRF, and for the progressive mutualisation of their use over time, in an inter-governmental agreement.