The Single Resolution Mechanism is the European body of the banking union in charge of the recovery and resolution of banking problems at the European or national level. As long as it is derived to the viability of the institutions.
This body dependent on the European Commission, and endorsed by the European Central Bank and other supranational bodies. The MUR was born in the summer of 2014, in the heat of the doubts about the European banking system.
It establishes the criteria, systems and actions to be taken for the recovery, rescue and implementation of programs that provide viability to European banks. Unlike the European Supervisory Mechanism, which ensures the good conduct and situation of the banks, the SRM seeks to be the executing arm of the appropriate measures once the banks have problems.
Composition and operation of the SRM
The Single Resolution Mechanism is divided into two sub-elements:
- The Single Resolution Board : Composed of the various member countries of the European Monetary Union according to their weight, and aimed at maintaining the stability of banking institutions and continuity of banking services in the event of a crisis. In addition to determining the form of liquidation of banks in the case of problems. As long as, without resulting in a cost to the taxpayer. Also, preventing it from affecting the economy and financial structure of the countries.
- The Single Resolution Fund : These are the financial resources made up of the participating states. Funds that may be used in the resolution and help to entities in difficulties.
Objectives of the Single Resolution Mechanism
The MUR was created with the idea of alleviating the public accounts of the states by correcting problems in their banking systems. In this way, allocating to a solidarity fund, among all the states, 1% of the deposits of all European banks.
In this way, a common strategy was also established throughout Europe on how to operate in the event of bank bailouts and their liquidation. Thus, preventing a domino effect between banks in the Eurozone.
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