Public funding of failing banks in the European Union (LBF vol. 19) 2020/8.6.4:8.6.4 Harmonisation of normal insolvency proceedings

Public funding of failing banks in the European Union (LBF vol. 19) 2020/8.6.4

8.6.4 Harmonisation of normal insolvency proceedings

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According to the SRB, the harmonisation of insolvency regimes and their improvement from a resolution perspective remains essential to increase the effectiveness of the resolution regime. Currently, the SRM framework is faced with 19 or more different insolvency procedures in the European Banking Union.1 The SRB also states that recent cases highlighted the prevailing need for an eventual harmonisation of national insolvency laws. The failing or likely to fail (FOLTF) assessment does not automatically link to the criteria for insolvency/liquidation. Similarly, the assessment regarding the NCWO principle uses insolvency as the counterfactual scenario. Only by establishing harmonised standards in this regard can identical outcomes in all Member States be ensured of these evaluations.2

In its review of the resolution framework, the Commission already announced that it launched a study to get a better understanding of the issues and identify potential policy options for harmonisation.3 In addition, BRRD II introduces a new Article 32b which requires Member States to ensure that a bank in relation to which the resolution authority considers that the resolution conditions, besides the public interest condition, are met, should be wound up in an orderly manner in accordance with the applicable insolvency law.

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