First Reflections on the Crisis Management Framework in the Banking Union

The European Union is going towards a certain degree of centralization in the management of its financial sector, and of the crises in such sector. However, despite the direction of the process is the same, the pace seems different. From an institutional viewpoint, the establishment of a Single Supervisory Mechanism seems to require by necessity a similar centralization of Resolution functions at the European level: at least for those financial institutions which will be directly supervised by the ECB. If this was not the case, in a crisis situation there would be a coordination problem between a supervisory authority at the European level, and one or more competent resolution authority(ies) at the national level. In this context, the role of the fiscal backstop in the management of such crises would be both an additional complication and a key element for future developments (in the sense of further centralization). For those institutions which will be subject to the ECB direct supervision, a fiscal backstop should be provided at the European level by the ESM, being this: otherwise a single supervisor without influence on crisis management tools would risk to be least effective when most needed. In fact, the strongest driver for the accomplishment of a Banking Union was probably the need to share the burden of managing crises in the European financial sector. An alternative possible outcome of the process would be a shared competence between a single supervisor (and a single resolution authority) at the European level, and several providers of a fiscal backstop at the level of each Member State. This latter option would however be characterized by strong conflicting incentives between the national and the European level. Against this background, the paper focuses on the future (possible) relationships between resolutions authorities and the SSM.