Addressing the issue of Too-Big-to-Fail (TBTF) banks has been the overriding aim of financial services policy since the crisis, reflected in the host of regulatory initiatives that lawmakers have proposed in light of this objective. At the core of these efforts lies the goal of making banks 'resolvable' in distress to reduce the risk of having to bail them out with public funds.

A 'resolvable' bank is one that resolution authorities consider could be dealt with in an orderly fashion in the event of its failure, rather than having to provide it with public support to maintain financial stability or ensure the continuity of critical banking services. The EU's response to resolvability was to introduce a cross-border resolution mechanism via the Bank Recovery and Resolution Directive (BRRD), which provides resolution authorities with comprehensive powers and resolution tools to intervene when a bank meets the conditions for resolution, whilst ensuring taxpayers avoid carrying the burden.

To ensure that decisions across participating Member States of the Banking Union are taken effectively and quickly, the EU created the Single Resolution Mechanism (SRM) with a strong centralised decision-making body, the Single Resolution Board (SRB), and the Single Resolution Fund (SRF). The SRM became fully operational, with a complete set of resolution powers, on 1 of January 2016,

What resolvability means and how it will be interpreted in detail has therefore been one of the key remaining pieces in the post-crisis regulatory puzzle.

With this guide we provide a comprehensive summary of the resolution planning approach detailed by the SRB and how Deloitte can help you in managing this new challenge.

Download PDF: Single Resolution Mechanism

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.