8.7.4 Introduction of a bank liquidation tool

The IMF recommends including an administrative bank liquidation tool for all banks within the SRB’s remit and banks considered systemic at the time of their failure.1 This recommendation requires harmonisation of the national insolvency proceedings followed by centralisation of insolvency powers at the level of the SRB. This is however not expected to happen in the foreseeable future. Introduction of a bank liquidation tool for the SRB would solve the issue of the ‘public interest’ test under the resolution framework, as the SRB would have the power to decide over the future of a failing bank both inside and outside of resolution. After all, the ‘public interest’ test not only determines whether or not a bank should be put in resolution, but currently also determines whether the power to decide over the future of a failing bank rests with the SRB (when the bank is put in resolution) or the Member State (when the bank is wound up in normal insolvency proceedings).2

When resolution is not in the ‘public interest’, the failing bank will have to be wound up in normal insolvency proceedings. These proceedings some times do not even differ that much from the resolution proceedings in terms of the outcome. They do, however, establish the decision-making powers at national level and leave room for the Member States to award State aid without the application of the mandatory bail-in threshold. The introduction of an administrative bank liquidation tool for the SRB could potentially contribute to the purity of the ‘public interest’ test, as it would remove the political charge from the test. However, if insolvency powers are also centralised at the level of the SRB, besides resolution powers, it may be necessary to rethink necessary checks and balances in order to ensure the sound exercise of these combined powers.