Public funding of failing banks in the European Union (LBF vol. 19) 2020/5.3.5.5:5.3.5.5 Access to GFST within the SRM?

Public funding of failing banks in the European Union (LBF vol. 19) 2020/5.3.5.5

5.3.5.5 Access to GFST within the SRM?

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The SRMR does not provide for a legal basis for the SRB – or the national resolution authorities – to seek funding through the use of the GFST.1 It is logical that the SRB, being a supranational agency, cannot seek funding from Member States, also taking into account the level playing field that the SRMR intends to achieve.2 It is understood that the SRB, as an EU agency, cannot interfere with the sovereignty of the Member States when, at the national level, the government takes the decision to support the bank by applying the GFST.3 Although the SRB may not actively seek funding through the use of the GFST, it can thus can also not prevent a Member State from using the GFST if a bank is put in resolution under the SRM and as long as there is no violation of the resolution framework. There will be no violation of the framework as long as the GFST are used in line with the requirements set out in the BRRD and – potentially – Article 27(9) SRMR. The only authority who could then still oppose to this use is the Commission, if the use of the GFST is in violation of the State aid rules.

It is explicitly stated in a briefing from the European Parliament that the GFST have not been included in the SRMR.4 Although this seems to be implied, the briefing does however not explicate whether the GFST are available under the SRMR. Binder notes that neither the availability of EPFS as such nor the procedural framework for the provision of EPFS within the institutional setting of the SRM have been adequately addressed in the SRMR.5 The author concurs with this conclusion. This status quo may be partly motivated by the fact that a Fiscal Union is still undebatable within the EU, as discussed in section 5.5.2.4. As long as Member States have the sovereignty to decide on the award of State aid within the boundaries set by the State aid regime for the banking sector aid the resolution framework, it will be difficult to fully achieve and resolution objective of protecting public funds by minimising reliance on EPFS.

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