Stillborn Banking Union: Explaining Ineffective European Union Bank Resolution Rules^†

Abstract

Our contribution demonstrates and explains the ineffectiveness of European Union (EU) bank resolution rules, a core element of Banking Union. This inadequacy owes in large part to the limited access to and insufficient availability of EU resolution funds and inadequate national deposit guarantee schemes in most EU member states, in conjunction with the relatively high minimum requirements for own funds and eligible liabilities (MREL) for many EU banks. In many cases, these requirements are unlikely ever to be metparticularly for retail banks most likely to require resolution in the euro periphery. We offer a liberal intergovernmentalist analysis to explain the inadequacy of the EU resolution regime by examining German and French government preferences on EU rules on bank capital requirements agreed earlier in 2013 and national deposit guarantee schemes agreed in 2014. These government preferences were shaped significantly by the preferences of national banks and bank associations.

Green Macro-Financial Governance in the European Monetary Architecture: Assessing the Capacity to Finance the Net-Zero Transition

“…Plans for a CCP Recovery and Resolution regime are still being discussed (Priem 2018). While the still ongoing construction of resolution regimes is a key strategy to facilitate orderly balance sheet contractions, it is untested and critics point out that its measures can hardly be enough to defend financial stability if the financial crash is only sufficiently large (Asimakopoulos and Howarth 2022). This brings us to an alternative strategy to facilitate an orderly final contraction.…”