1.4.1.3 The introduction of a common backstop to the SRF

As of 2016, all participating Member States of the SSM (participating Member States) have entered into a harmonised loan facility agreement with the SRB, providing a national individual credit line to the SRB to back their national compartments in the SRF in case of possible funding shortfalls following resolution cases of banks in the Eurozone. It is considered desirable by the participating Member States and the Commission that a common backstop is designed that leaves no room for national considerations or segmentation. After all, when a fiscal backstop is provided for at national level, the strength of a banking system will always remain to be judged by that of its sovereign.1 The common backstop should be in place at the latest by the end of the transition period for the SRF in 2023. An option would be that a similar common fiscal backstop be created in the form of a credit line from the ESM to the SRF.2 This would, however, require a revision of the ESM Treaty.

In December 2017, the Commission published a proposal for a Council Regulation on the establishment of the European Monetary Fund (the EMF).3 It was the intention that the EMF would replace the ESM and take over its tasks. In December 2018, it became clear that no EMF will be established. Instead, it was decided by the heads of state and government of the 19 Eurozone Member States that the ESM Treaty will be amended in order to enable the ESM to provide a common backstop to the SRF in the form of a revolving credit line. It is intended that the common backstop will cover all possible uses of the SRF.4 At the time of writing this dissertation, the amendments to the ESM Treaty were not yet available.