Single Resolution Mechanism Banking supervision in the European Union
The Single Resolution Mechanism (SRM) is the second pillar of the banking union and complements the Single Supervisory Mechanism (SSM). The institutional framework consists of the Single Resolution Board (SRB), the national resolution authorities and the Single Resolution Fund (SRF). The SRM is designed to ensure an orderly resolution of banks, including across borders, in the member states of the banking union in order to avoid substantial negative repercussions for financial stability, the real economy and public finances.
As a fundamental principle, shareholders and creditors are to be first in line to absorb losses in a resolution event. Only then can the SRF come into play, followed, as a last resort and only under certain circumstances, by the taxpayer.
The SRB acts as the resolution authority for all institutions directly supervised by the ECB and for cross-border groups within SSM member states. Not only does the SRB cooperate closely with the national resolution authorities, the European Commission and the European Parliament; in order to successfully coordinate supervision and resolution activities, close and effective collaboration is also needed between the SRB, the ECB and the national supervisory authorities in the fulfilment of their respective responsibilities.