Research Papers

With respect to the resolution of failing banks, the Member States have showed particularly fierce resistance to giving up national sovereignty in favor of a EU-level approach. While the crisis has given some momentum to reforming the largely nationally-based framework for bank resolution, a system of shared responsibility is clearly a longer-term project. This paper studies the evolution of a EU-level legal and institutional framework for bank resolution. Such framework needs to deal with two mutually reinforcing aspects: the distribution of responsibility for dealing with failing banks and the allocation of financial burdens related to banks’ resolution. Instead of first reforming the distribution of responsibilities and channels of cooperation before addressing the question of financing, the Commission seems to take the opposite and somewhat counter-intuitive approach. Indeed, the implementation and harmonization of national structures for bank resolution financing will likely increase the political feasibility of shared responsibility for bank resolution. The paper argues that the Commission’s strategy is to induce cooperation through the backdoor.