Policy brief

Who decides? Resolving failed banks in a European framework

When public support is provided to failed institutions it should come from a bankfunded resolution fund. This would reduce taxpayers’ direct costs, an

Publishing date
29 November 2013

As the basis for a European regime for resolving failing and failed banks, the European Commission has proposed the Bank Resolution and Recovery Directive (BRRD) and a regulation establishing a European Single Resolution Mechanism (SRM) and a Single Bank Resolution Fund (SBRF). There is a debate about which parts of the proposed SRM-SBRF to add to the BRRD. The BRRD sets out a resolution toolkit that can be used by national resolution authorities. The SRM would involve European institutions more at the expense of national resolution authorities. This change could affect resolution outcomes.

Domestic resolution authorities might be more generous than supranational authorities in providing assistance to banks. A supranational approach might be more effective in minimising costs for taxpayers. But regardless of the final design, more attention is needed to ensure that resolution authorities are politically independent from governments.

When public support is provided to failed institutions it should come from a bankfunded resolution fund. This would reduce taxpayers’ direct costs, and would make banks less likely to take risks and advocate for bailouts

About the authors

  • Mark Hallerberg

    Mark Hallerberg was a Non-Resident Fellow at Bruegel from September 2013 to 2022. He is a Professor of Public Management and Political Economy at the Hertie School of Governance and is Director of Hertie's Fiscal Governance Centre.

    He is the author of one book, co-author of a second, and co-editor of a third. He has published over twenty-five articles and book chapters on fiscal governance, tax competition and exchange rate choice.

    He has previously held professorships at Emory University, the University of Pittsburgh, and the Georgia Institute of Technology. He has done consulting work for the Dutch and German Ministries of Finance, Ernst and Young Poland, the European Central Bank, the German Development Corporation (GIZ), the Inter-American Development Bank, International Monetary Fund, and the World Bank.

  • Christopher Gandrud

    Christopher Gandrud is a Lecturer in Quantitative International Political Economy at City University London and Post-Doctoral Researcher at the Fiscal Governance Centre, Hertie School of Governance. His research focuses on the international political economy of public financial and monetary institutions, as well as applied social science statistics and software development. His work has been published in peer reviewed journals including the Journal of Common Market Studies, Journal of Peace Research, Research and Politics, Review of International Political Economy, Political Science Research and Methods, Journal of Statistical Software, and International Political Science Review. He has been a Lecturer in International Relations at Yonsei University and a Fellow in Government at the London School of Economics where in 2012 he completed a PhD in quantitative political science.

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