EU Solidifies Banking Union: Agreement on Single Resolution Mechanism

The financial crisis in Europe highlighted the need for better regulation and supervision of the financial sector, and since 2010, the European Commission—the EU’s executive arm—has proposed nearly 30 sets of rules to ensure that all financial actors, products, and markets are appropriately regulated and efficiently supervised. 

These rules constitute the basic framework for all 28 EU Member States and are the foundation of a properly functioning single market for financial services.

As part of this new framework, the EU has made swift progress toward completing a banking union, comprising single centralized mechanisms for the supervision and restructuring of banks. Under the Single Supervisory Mechanism, which will be fully operational in November 2014, the European Central Bank assumes the role of supervisor, ensuring the consistent application of EU banking rules in the euro area and in non-euro area Member States that wish to participate.

The Single Resolution Mechanism is complementary to the Single Supervisory Mechanism and will ensure that potential future bank failures are managed efficiently, with minimal costs to taxpayers and the real economy. The Supervisory and Resolution Mechanisms go hand-in-hand and apply to euro area countries and participating non-euro area EU Member States. The March 20 agreement on the Single Resolution Mechanism brings the EU close to completing the architecture for the banking union.