8.8.1 Breaking the link between banks and Member States

One of the author’s working assumptions was that the promise that the resolution framework avoids taxpayers losses is empty without a Fiscal Union being in place. Through the research the author conducted for this dissertation, she came to the conclusion that the resolution framework is used as a tool to take steps towards a Fiscal Union, just like State aid policy led to resolution harmonisation across the EU.

The resolution framework has not changed that it is the prerogative of Member States to decide whether or not to grant State aid to a bank, even though this is restricted by State aid control and by the agreements set out in the Fiscal Compact Treaty. The SRB or the national resolution authorities cannot prevent a Member State from providing State aid to a failing bank. The current resolution framework does, however, restrict the prerogative of the Member States to award State aid, as a result of which the link between banks and Member States has become weaker. First, it has introduced conditions that the Member States have to comply with when awarding State aid. Examples thereof are the conditions that have to be met in order to have access to GFST and precautionary recapitalisation. If Member States do not comply with these conditions when awarding these forms of State aid, they would be violating the resolution framework. This differs from the conditions set out in the State aid regime for the banking sector: under this regime it is possible for Member States to notify to the Commission aid measures that they consider to be compatible with Article 107(3)(b) TFEU without meeting the conditions set out in the State aid regime for the banking sector, and the Commission may authorise this in exceptional circumstances.

Secondly, the resolution framework introduced the SRF, a supranational form of funding. The Member States do not play a role in the decision whether or not to use the SRF, since the relevant decision-maker in that case is the SRB.1 During the GFC, ‘taxpayers’ money’ was the main source of funding for failing banks, because access to other funding resources was not secured. There were no supranational funds available, such as the SRF or the ESM. The only other funding resources that were available at the time of the GFC were ELA awarded by the national central banks and contributions from national deposit guarantee schemes, notwithstanding the lack of a uniform regime within the EU.

Thirdly, a link has been created between the award of public funding and the resolution procedure,2 with the result that the resolution authority is involved when a Member State intends to award State aid. When said authority is the SRB,3 this may safeguard that national interests cannot be pursued at the expense of the general interest. However, as long as the SRB still has to deal with Member States, both regarding the availability of public funding and regarding the applicability of normal insolvency proceedings, the resolution framework will not be able to fully live up to its promise.