How the Single Resolution Mechanism works
Resolving failing banks
The European Central Bank (ECB), after consulting the Single Resolution Board (SRB), identifies if a bank is failing or likely to fail.
The case is brought to an SRB executive session.
Finding a solution
The SRB executive session adopts a decision:
- Is a private sector solution possible?
- If not, is a resolution in the public interest?
- If a resolution is not in the public interest, the bank will be wound up
- If a resolution is in the public interest, the SRB moves to a resolution scheme
When adopting a resolution scheme, the SRB:
- identifies which resolution tools to use
- decides whether and how much of the single resolution fund (SRF) can be used
- places the bank under resolution
Approving the resolution scheme
EU institutions have maximum 24 hours to give their green light.
Option 1
- The European Commission endorses the scheme
- The resolution scheme enters into force
Option 2
- The Commission raises objections to discretionary elements of the scheme
- The SRB has eight hours to change and approve the scheme
- The resolution scheme enters into force
Option 3
- The Commission raises objections to the use of the SRF or the decision on public interest (within 12 hours)
- The case is referred to the Council of the European Union for a decision
The Council decides by simple majority and within 12 hours to:
- refuse the objection: the scheme enters into force
- adopt the objection to the use of the SRF: the SRB has eight hours to change and approve the scheme, then the scheme enters into force
- adopt the objection to the decision on public interest: the scheme is not approved and the bank is wound up
Last review: 12 August 2022