4.3.3 The geographical scope of the resolution framework

The geographical scope of the BRRD and SRMR differs. The BRRD applies to all EU Member States. In addition, the BRRD has been incorporated in the EEA Agreement by means of a Decision by the EEA Joint Committee.1

The SRMR only applies to the Member States that are participating Member States of the SSM.2 These are the Eurozone Member States and other Member States that have opted to participate in the SSM. At the time of writing this dissertation, there are no Member States outside the Eurozone that made use of this option. As long as supervision in a Member State remains outside the SSM, that Member State should remain responsible for the financial consequences of a bank failure. The SRM therefore only extends to banks and banking groups established in Member States participating in the SSM and subject to the supervision of the ECB and the national authorities within the framework of the SSM. Banks and banking groups established in Member States not participating in the SSM are not subject to the SRM. Subjecting these Member States to the SRM would create the wrong incentives for them. In particular, supervisors in those Member States may become more lenient towards banks in their jurisdictions as they would not have to bear the full financial risk of their failures. Therefore, in order to ensure parallelism with the SSM, the SRM only applies to Member States participating in the SSM. As Member States join the SSM, they also automatically become subject to the SRM. Ultimately, the SRM could potentially extend to all Member States.3