Czech Business Today

The proposed Single Resolution Mechanism for the Banking Union would complement the Single Supervisory Mechanism which will see the European Central Bank directly supervise banks in the euro area and in the other Member States which decide to join the Banking Union. 

The Single Resolution Mechanism would ensure that if a bank subject faced serious difficulties, its resolution could be managed efficiently with minimal costs to taxpayers and the real economy. The proposal will provide for a strong and integrated single system for dealing with failing banks. The Single Resolution Mechanism would work as follows:

• The ECB, as the supervisor, would signal when a bank in the euro area or established in a Member State participating in the Banking Union was in severe financial difficulties and needed to be resolved.
• A Single Resolution Board, consisting of representatives from the ECB, the European Commission and the relevant national authorities, would prepare the resolution of a bank.
• On the basis of the Single Resolution Board’s recommendation, or on its own initiative, the Commission would decide whether and when to place a bank into resolution and would set out a framework for the use of resolution tools and the fund. For legal reasons, the final say could not be with the Board.
• Under the supervision of the Single Resolution Board, national resolution authorities would be in charge of the execution of the resolution plan.
• A Single Bank Resolution Fund would be set up under the control of the Single Resolution Board to ensure the availability of medium-term funding support while the bank was restructured. It would be funded by contributions from the banking sector, replacing the national resolution funds of the euro area Member States and of the Member States participating in the Banking Union.

The EESC welcomes the proposals to set up a Single Resolution Mechanism and associated financing mechanism, which, alongside the proposals on the Single Supervisory Mechanism, the European Stability Mechanism and the recovery and resolution of banks, forms an important new building block in developing the Banking Union. The resolution procedures set out in the mechanism will need to be efficient and effective, and the proposed instruments will need to be mobilized with the required speed at both national and cross-border level should the need arise, particularly in emergencies. With regard to the Single Resolution Board, it is vitally important for its members to have the greatest possible independence and expertise and for democratic scrutiny of its decisions to be built in. 

The Committee welcomes the proposed Single Bank Resolution Fund. The legal basis of the fund should be clarified as soon as possible. The Committee considers it important to ensure that the resolution fund has the financial resources it needs to fulfill its role properly. When setting the target level for the fund, fed by contributions from the banks, the various financial sector recovery measures in different areas should be taken into account. Czech businesses are being careful about the SRM proposal, sharing the concerns of the Czech government that the SRM could lead to transfer of risks and costs to countries outside the system and to distortion of the Single Market integrity. 

This is very important especially for the Czech economy, taking into account that most of the banks are subsidiaries of large eurozone banks and their potential transformation to affiliated banks would lead to the loss of national supervision and to the use of their assets on parent bank rescuing.

Marie Zvolská
EESC Member– Employers Group