"From supervision to resolution: next steps on the road to European banking union"

The steps needed to achieve the timely creation of the banking union represent a marathon run in which Europe cannot afford to fail

Brussels, 19th February 2013 - Bruegel, the Brussels-based international economics think-tank, today publishes From supervision to resolution: next steps on the road to European banking union,” an External Publication prepared for the Economic and Monetary Affairs (ECON) Committee of the European Parliament.

The paper, written by Nicolas Véron and Guntram Wolff, addresses the decisions by the European Council in mid-December on moving forward towards a European banking union. After foreseeing three successive steps in the policy agenda -including the Single Supervisory Mechanism (SSM); the Bank Recovery and Resolution (BRR) Directive and the European Stability Mechanism (ESM); and the Single Resolution Mechanism (SRM)-, they provide the following recommendations to balance short-term, medium-term and long-term objectives.

  • Granting the European Parliament a right of consent over the appointment process of the Chair, Vice-Chair and two other members of the supervisory board of the SSM;
  • Finalising the Capital Requirements Regulation by removing its elements of material non-compliance with the international Basel III Accord;
  • Finalising the BRR Directive with enhanced discretion for national authorities to take prompt corrective action on weak banks and impose losses on creditors in bank restructurings;
  • Abandoning the provisions for binding mutual lending arrangements among national funds in both the BRR and DGS Directive;
  • Finalising an operational framework for direct recapitalisations by the ESM while leaving it substantial discretion for future intervention, including the assumption of some risks (but not of losses or near-certain losses) incurred under past supervision by national authorities;
  • Creating the SRM with a central body at its core, either within the European Commission, with appropriate governance design to ensure sufficient independence, or as a new temporary or permanent organization;
  • Empowering the SRM to make binding decisions that are implemented through national resolution regimes;
  • Creating mechanisms to mobilise an adequate mix of national and European financial resources to the extent needed for the implementation of SRM decisions;
  • Delaying radical decisions on banking structure regulation, at both the national and the European levels, until after the creation of the SRM.

According to the paper, the programme that was outlined by the Council in December 2012 entails a large number of policy questions of considerable complexity. The challenge remains to explore all these matters in due time and in a reasonable sequence.

You can download the full publication here

Leire Ariz
Media Officer
T. 32 2 227 4214
Follow us on Twitter @Bruegel_org

Bruegel is an independent economic think tank. It contributes to European and global economic policy-making through open, fact-based and policy-relevant research, analysis and debate. Membership is composed of EU governments, leading international corporations and institutions.


About Us

About Bruegel Improving economic policy Bruegel is a European think tank specializing in economics. Established in 2005, Bruegel is independent and non-doctrinal. Our mission is to improve the quality of economic policy with open and fact-based research, analysis and debate. We are committed to impartiality, openness and excellence. Bruegel’s membership includes EU Member State governments, international corporations and institutions. Bruegel is a non-profit international association under Belgian law (AISBL), governed by its Statutes and its Bylaws. The Board is appointed by the members with some board members being directly elected. It is chaired by Jean-Claude Trichet and its 11 members all have distinguished backgrounds in government, business, civil society and academia. Former chairmen Mario Monti and Leszek Balcerowicz were appointed Honorary President and Honorary Chairman, respectively. The Board decides on strategy, adopts the research programme and budget and approves appointments of senior staff. It appoints the Director, currently Jean Pisani-Ferry and the Deputy Director, currently Guntram B. Wolff. The Director is in charge of the management of Bruegel, with the assistance of the Deputy Director. They jointly prepare the research programme, annual work plan, budget, and annual report and present them to the Board. They also exercise editorial oversight over publications and control the quality of output. Bruegel takes no institutional standpoint and publications reflect the views of the authors only. The Scientific Council is appointed by the Board and advises Bruegel’s management and staff, as well as the Board, on research. It also evaluates the quality of Bruegel’s research. The chairperson of the Scientific Council attends Board meetings. The independence, professional integrity and objectivity of Bruegel’s research are among its principal assets. All Bruegel scholars have to sign a Statement of Research Integrity, which commits them to avoid partisanship, parochialism, and capture of special interests. Bruegel’s scholars and management disclose their outside interests annually. Bruegel publishes all funding and spending in a transparent manner in its Annual Report. Bruegel‘s income is composed mainly of annual subscriptions from its members. All corporate members contribute the same amount, i.e. ‚ €50,000 per year. State membership contributions depend on the size of the country. In total, subscription funding is balanced between public and private-sector contributions, and no single member contributes more than 3% to 5% of the yearly budget, depending on the budget year. A diversified funding base helps to buttress Bruegel’s independence. Bruegel’s work is evaluated every three years by an independent committee. Bruegel’s members appoint the committee, balancing background and experience with the aim of reviewing all of Bruegel’s output and how well it has fulfilled its mission. The committee is free to determine for itself the most effective way of evaluating Bruegel’s work and it is assisted in the task by the Scientific Council who give the committee an assessment of the scientific quality of Bruegel’s output. Bruegel has undergone this independent evaluation exercise in 2007 and 2010 and will begin another evaluation in 2013. The report of 2010 can be found here. Bruegel is comprised of a core fellowship of top researchers from around the world, Resident, Non-resident and Affiliate, plus a team of operational staff. It also operates a Visiting Fellow programme, which allows researchers from around the world to contribute to Bruegel’s work for a limited time, normally visiting from another institution. For any questions on membership and Bruegel more generally, please do not hesitate to contact our Secretary General, Matt Dann. More information can be found in the links below.