VALORES FUNDAMENTALES DE LA CARRERA A LOS QUE TRIBUTA.

In May 2013 the French and German governments (2013) released a press statement, in this statement they announced their plans for a stronger Europe of stability and growth, concerning the Single Resolution Mechanism they agreed on the following: a single resolution board, involved national resolution authorities, should be allowed to make decisions at the central level in a quick, effective and coherent way, the single resolution mechanism should be funded by the financial sector itself, the ESM could play a bigger role in lending facilities or

recapitalization, investigate if the Single Resolution Mechanism and the ESM should be combined. A few months later, in July, the European Commission (2013b) presented its plans for the establishment of the Single Resolution Mechanism and a Single Bank Resolution Fund. In March 2014, The European Parliament, the European Commission and the European Council agreed about the text of Regulation 806/2014, as explained by Alexander (2015) they agreed that: (1) the ECB identities when a bank, supervised by the SSM, is in financial distress and needs to be resolved, (2) A Single Resolution Board would be established, with representatives of the European Commission, the ECB and national resolution authorities, (3) the European Commission would get the power to decide whether the recommendation (including the resolution plan) of the Single Resolution Board should be approved and send its approval to the European Council for final review, (4) national resolution authorities implement the approved resolution plan, the Single Resolution Board supervises the national resolution authorities in implementing this plan, and (5) outside the EU-treaty, via an intergovernmental agreement, there would be a Single Resolution Fund with 55 billion euro in 2024, it is the supervised banks that have to pay the fund.

Via Regulation 806/2014 the Single Resolution Mechanism (SRM) was established. Based on Article 98 Regulation 806/2014, the Single Resolution Board is operational since January 2015. The Regulation itself is applicable in phases; Article 99 Regulation 806/2014 sets that the Single Resolution Mechanism will be fully operational in January 2016.

Article 1 Regulation 806/2014 explains the objective of the SRM, which is to establish uniform rules and a uniform procedure for the resolution of banks. To achieve the objective, the Single Resolution Board has based on Article 7 (1) Regulation 806/2014 the responsibility for an effective and consistent functioning of the SRM. As stated in Article 7 (2) Regulation 806/2014 the Single Resolution Board has the responsibility to draw up resolutions plans and adopt decisions related to the resolution of banks. National resolution authorities help the Single Resolution Board and are responsible for adaptation of resolution plans, adaptation of measures related to intervention. The ECB or a NCA informs the Single Resolution Board when a bank is about to fail (Article 13 Regulation 806/2014), subsequently the Single Resolution Board informs the European Commission and adopts a resolution scheme which respects the principles of Article 15 Regulation 806/2014 which includes that the shareholders bear the first

losses, senior management has to be replaced, natural and legal persons are made liable for their responsibility for the failure of the bank, and covered deposits are fully protected.

The Single Resolution Board is also responsible for and the owner of the Single Resolution Fund (Article 67 Regulation 806/2014). The Single Resolution Fund, Article 76 Regulation 806/2014 explains that the Single Resolution Board may be used for: (a) to guarantee the assets or the liabilities of the institution under resolution, (b) to make loans to the institution under resolution, (c) to purchase assets of the institution under resolution, (d) to make contributions to a bridge institution and an asset management vehicle, (e) to pay compensation to shareholders or creditors, (f) to make a contribution to the institution under resolution in lieu of the write- down or conversion of liabilities of certain creditors, when the bail-in tool is applied and the decision is made to exclude certain creditors from the scope of bail-in, and (g) any combination of the above mentioned. As explained by De Witte (2015) it was on the request of the German government that the original regulation for a EU-wide banking resolution mechanism was spilt in a regulation for the SRM and an international agreement, officially the intergovernmental Agreement (IGA) on the transfer and mutualization of contributions to the Single Resolution Fund (2014a), which establishes the Single Resolution Fund (SRF). The reason why Germany wanted to spilt these two is according to De Witte (2015) the opinion of the German government that financing contributions by banks is a fiscal provision, which does not fall under the scope of Article 114 (1) TFEU. The Council of the European Union (2014b) argued that an international agreement would provide “maximum legal certainty” as there were “legal and constitutional concerns” in some Member States. Fabbrini (2014) nonetheless disagrees with the opinion of the German government; he argues that there is no rule in European Union law that says that the European Union cannot impose financial duties on Member States through European Union regulations. Another possibility that De Witte (2015) mentions for the IGA are political reasons, he argues that via the IGA Germany could better protect its interests regarding the bail-in provision in the SRM regulation. In May 2014 all Member States but Sweden and the United Kingdom signed the IGA. Sweden and the United Kingdom are also not participating in the SRM. In Declaration Number 2, which is part of IGA, the Member States agreed that they should ratify the IGA on time so that the SRM can be fully operational in January 2016. As announced by the Council of the European Union (2015) at the end of

November 2015 enough Member States had ratified the IGA and therefore the SRM can indeed be fully operational in January 2016.

The Single Resolution Board itself is according to Article 43 Regulation 806/2014 composed of a Chair (currently König, former President of Bundesanstalt für Finanzdienst- leistungsaufsicht – BaFin), a Vice Chair (Löyttyniemi, former Managing Director of the Finnish government’s State Pension Fund), 4 full-time members (Laviola (Director of Strategy and Policy Coordination), Carrascosa (Director of Resolution Planning and Decisions), Jazbec (Director of Resolution Planning and Decisions) and Laboureix (Director of Resolution Planning and Decisions)14 _{and 1 member per Member States representing the national}

resolution authority (2015).

In reply to the report of Liikanen the European Commission (2014a) presented in January 2014 a proposal for a regulation on banking structural reform, as it believed that the largest European Union banks by assets remain “too-big-to-fail, too-big-to-save and too-complex-to-resolve.” The European Commission wants to prevent that there is no European Union-wide approach in reforming banking systems in the European Union as some Member States have adopted structural reform measures for their national banking systems, the European Commission believes that this approach would increase fragmentation and complexity of the banking sector in the European Union and has a negative effect on the effectiveness of the SSM and SRM. The legal foundation is again Article 114(1) TFEU. The aim of the proposed regulation is described in Article 1 Proposal on structural measures improving the resilience of EU credit institutions, and is summarized to prevent systemic risk and the failure of credit institutions, by as mentioned in Article 2 prohibiting proprietary trading (further explained in Article 6(1); G- SIBs are not allowed to engage in proprietary trading in financial instruments and commodities15 _{and should become effective in January 2017) and separating certain trading} 14 _{Each Director of Resolution Planning and Decisions coordinates different Member States and different banks.} 15_{Proprietary trading is defined by the European Commission in Article 5 (4) Proposal on structural measures}

improving the resilience of EU credit institutions: “using own capital or borrowed money to take positions in any type of transaction to purchase, sell or otherwise acquire or dispose of any financial instrument or commodities for the sole purpose of making a profit for own account, and without any connection to actual or anticipated client activity or for the purpose of hedging the entity’s risk as result of actual or anticipated client activity, through the

activities (becoming effective in July 2018). Article 3 sets the scope of the regulation and includes all European G-SIBs. Article 9 decides which bank’s activities should be reviewed by the competent authority, namely market making, investments in and acting as a sponsor for securitization, and trading in derivatives. Article 10 (1) and (2), when the competent authority decided that the activities of a bank are “a threat to the financial stability of the core credit institution or to the Union financial system as a whole”, then these activities need to be, according to Article 13 (1) “legally, economically and operationally” separated from the core credit institution. The competent authority has to consult EBA before taking the decision to separate the activities of the bank (Article 10 (3)).