8.7.2 Designation of the SRB as centralised public funding authority

A further step would be to centralise the decision-making powers with respect to the use of public funding resources within the European Banking Union, other than ELA and ERL, at the SRB. This would go hand in hand with the further centralisation of public funding resources within the Eurozone as discussed in the previous section. If the SRB is designated as an independent EU institution, similar to the ECB,1 this would eliminate the need for the involvement of the Commission in the decisions of the SRB. This would be helpful in the further development of the tasks and responsibilities of the SRB.

In the author’s view, the Commission should be the authority that assesses whether the centralised public funding means do not violate distortion of competition between the Member States, most notably between Member States in and outside the European Banking Union. There are, however, also other views. According to the IMF, consideration should be given to paring back procedures for State aid oversight for resolution decisions taken by the SRB, given the lower risk of distorting competition for national interest.4

Hellwig argues that, because financial stability, systemic risk and costs to taxpayers are not the primary focus of State aid control, there is a danger that measures undertaken in State aid control may sometimes be too strict and sometimes too lenient.5 In addition, he mentions that the State aid procedure takes time. During this time, the situation of the banks may worsen, the recapitalisation needs may become larger and the bail-in-able creditors may run.6 In the author’s view, these risks will be mitigated if the Commission focuses on preventing the distortion of competition, while the SRB focuses on the financial stability and systemic risk assessment, in cooperation with the ECB and national competent authorities. The Commission can even use this assessment by the SRB to balance the positive effects of State aid against the distortion of the competition, which could in turn also contribute to the further alignment of the ‘public interest’ test and the State aid assessment. Costs to the taxpayers is a topic that needs to be addressed in the assessment by both the Commission and the SRB from their respective angles. With respect to the time delay, the Commission has already shown during the GFC that it is willing to deviate from the procedural outline set out in the Procedural Regulation and can act swiftly. It is therefore the author’s view that the Commission would be the most appropriate authority to assess centralised public funding within the European Banking Union, while the SRB would be the most appropriate authority to decide on the use of such public funding.