The Single Resolution Mechanism – The Second Pillar of the European Banking Union

Abstract

The financial crisis from 2008 has exposed all the imperfectness of the EU financial infrastructure threatening to endanger the existence of the common currency and of the entire project for European integration. Profound reforms in the financial sector have started in order to make European financial system more resilient to crises. As part of a broader plan for completing the Economic and monetary union the European banking union has provided a sound base for more institutional integration for regulation, supervision and resolution of the credit institutions in the EU. One of the key elements of the Banking union is the Single Resolution Mechanism that should provide resolution on supranational level for EU banks with cross border activities. This article explains the need for a common resolution mechanism on the EU level presents the legal framework regulating the Single Resolution Mechanism, gives an overview of the resolution procedure and the structure of the newly created mechanism. Furthermore, the paper explores possible impact of the creation of the Single Resolution Mechanism in the EU integration process of a candidate country for EU membership.