Graham Bishop: Governance of the SRM - Escalating complexity = inability to act in extreme crisis?

11 December 2013

Graham reviews the latest text of the Terms of Reference for the Single Resolution Mechanism.

The Financial Times has published the latest text (link / full article for FT subscribers) but market participants should now be asking if this effort is becoming counter-productive. Is it plausible that it will actually work in the extreme circumstances of the imminent failure of a major bank? The increasingly probable answer is NO.

The first issue is whether such a package of proposals is likely to be enacted by the April deadline for the European Parliament's dissolution. The decision to go for inter-governmental legislation for the 'Resolution Fund' is being contested by Parliament as it would prefer an act under TFEU Article 352 because that would give the Parliament full involvement. But I am surprised that the Parliament is taking such a hard line on the Resolution Fund being a 'Union' body rather than inter-governmental, as using Article 352 requires unanimity at 28 (i.e. includes UK) and actually requires the Commission to draw it to the attention of national Parliaments and therefore anti-Europeans in the UK Parliament. That hands them a potentially wrecking power.

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© Graham Bishop