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THE FINANCIAL SYSTEM OF THE EUROPEAN UNION
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the euro zone, particularly the 130 that are con-
sidered systemic (those whose assets amount to
more than 30 billion euros, 20 percent of na-
tional GDP or which have received funding from
the EFSF or the ESM). This means that the sys-
temic banks are supervised directly by the ECB,
while the rest are monitored by the national
supervisors, although the ECB reserves the right
to take over direct supervision.
The SSM philosophy also means a strict sep-
aration between monetary policy tasks and
banking supervision.
As for the states that do not form part of the
euro zone, in principle they can join the SSM, but
as they do not form part of the ECB their partici-
pation will consist of close cooperation between
the competent national authority and the ECB.
The most practical thing in any case is for inter-
ested countries to speed up adherence to the
conditions for adopting the single currency.
The resolution of financial institutions
Banking union would not have sufficient credi-
bility if it were limited to the pooled regulation
and supervision of financial institutions. Hence
the third pillar concerns resolution, although the
word restructuring would perhaps have been
more appropriate, at least in Spanish. Resolution
as a legal term indicates ending (for example,
when one of two parties decides to rescind a
contract because the counterparty fails to meet
their obligations, the contract is resolved).
Therefore resolution and liquidation of financial
institutions appear to be synonymous terms, but
in fact resolution can end either in the liquida-
tion of institutions or in their recapitalisation, or
even in a combination of the two (the segrega-
tion of divisions to maintain those that are via-
ble and liquidate those that are not).
The Single Resolution Mechanism (SRM) was
set up to perform this task, furnished with a
Board that decides on the resolution of financial
institutions in crisis and with a Single Resolution
Fund (SRF), governed by Regulation (EU)
806/2014 and an Intergovernmental Agreement
of the participating states. Resolution, insofar as
in can mean injections of capital into the institu-
tions, cannot be done at the cost of the tax-
payer, in principle, which is why the euro-zone
banks will have to make contributions to the
SRF. They will be progressive, reaching the figure
of 55 billion euros over the course of eight
years. During this time, the SRF will maintain a
system of national compartments that will be
gradually mutualised, starting with 40 percent
in the first year.
The SFR is without doubt one of the main
achievements of banking union from the point
of view of the integration and creation of
European solidarity mechanisms on a non-state,
inter-business basis in this case. Although it is
true that the amount is clearly insufficient to
deal with the restructuring of two or three ma-
jor euro-zone banks, it must be pointed out that
when the transitional phase is completed, the
recapitalisation of the financial institutions of
the participating states is going to done on not
a national, but European basis. In other words,
contributions from the German institutions will
eventually serve to recapitalise Spanish banks
and vice versa.
In this respect, it is important to highlight the
absence of a fundamental element in the resolu-
tion pillar: a common or single deposit guarantee
fund. The purpose of the rules and institutions
created is to protect the taxpayer and exclude the
rescue of shareholders and holders of bank debt.
Yet a solid and reliable financial system has to
offer some sort of guarantee to savers. Hence
Banking Union should have incorporated a