4.10 Conclusion

The GFC showed that general corporate insolvency procedures may not always be appropriate for banks as they may not always ensure sufficient speed of intervention, the continuation of the critical functions of institutions and the preservation of financial stability.1 This formed the justification to take away the power to determine resolution from courts and confer these on administrative authorities, the resolution authorities.

Taking into account that failure of banks is not only a national problem, solving this cannot remain in the hands of national governments alone. However, in order to successfully transfer power from the Member States to a supranational level, there must be sufficient political consensus and trust between all parties involved. The BRRD harmonized procedures for resolving banks at EU level, in order to submit resolution authorities to the same principles and to provide them with the same set of tools in order to achieve the resolution objectives. With the introduction of the SRB and the SRF, not only harmonisation, but also centralisation of the resolution process at supranational level took place within the European Banking Union.

Although the resolution framework has successfully been established, the devil is – as always – in the detail. The resolution framework is, mainly due to its dual structure, both on Eurozone and national level, at some points hard to read and fathom. In addition, the complexity of resolution, both in terms of involvement of the number of actors, and the procedural outline, makes that the concept of resolution is difficult to grasp, not only for the bank itself, but also for its shareholders and creditors. At the same time, resolution can have far reaching consequences. The case of Banco Popular, the first resolution case in which the SRB took the lead, shows that shareholders and subordinated debt holders can be confronted with a situation in which their shares and other capital instruments are written down without any compensation. Many of them started legal proceedings at the EU Courts. At the time of writing this dissertation, the EU Courts had not yet delivered a material judgment in these proceedings.

The resolution framework was already subject to revision, while it has barely seen its first practical applications. With the further development of its practicalities over the coming years, there will undoubtedly be many more causes for revisions of this framework. Amendments have to be carefully considered though, in light of the cohesion with other legal frameworks, such as company law, insolvency law, and State aid law.