Cross‐border coordination of bank resolution in the EU: All problems resolved?

Abstract

Among the many technical challenges that continue to have an impact on the effective resolution of large, complex, internationally active banking institutions and groups, the cross-border coordination of measures taken in different jurisdictions clearly is one of the most difficult to address. Given complex – and usually conflicting – vested national interests in home and host jurisdictions, cooperation requires not just a robust decision-making infrastructure, but also depends on the predictability of the economic outcomes of resolution – and on the fairness and reliability of ex ante commitments to joint burden-sharing. Given the dimension of these preconditions, it is hardly surprising that some jurisdictions, including, notably, the USA, have opted for ‘isolationist’, unilateral resolution actions vis-a-vis foreign-owned banks instead. The present article critically evaluates the new framework for cross-border bank resolution under the European Bank Recovery and Resolution Directive and the Single Resolution Mechanism as a counter-example, and identifies residual shortcomings in this regard.