Regulation (EU) No 806/2014, which will be fully operative as of January 2016, introduced the Single Resolution Mechanism (SRM) for credit institutions and certain investment firms (in Italy 'SIMs' ) that provide services involving taking risks on their own account, thus completing the Single Supervisory Mechanism (SSM). The aim is to preserve financial stability in the euro area by managing resolution procedures centrally. There are also plans for a Single Resolution Fund (SRF) financed by the contributions of euro-area credit institutions paid in under an 8-year plan, without the need for any public money.
The Single Resolution Mechanism (SRM) is composed of the National Resolution Authorities (NRAs) and the Single Resolution Board (SRB), a European agency that is also staffed by representatives of the NRAs. It is responsible for the orderly management of crises at banks that are classified as systemically important financial institutions or which operate across borders within the euro area, and at major SIMs, resolving any problems arising from the fragmentation of procedures along national lines. The SRB adopts decisions concerning resolution plans and new resolution procedures and identifies the most appropriate actions for the achievement of the objectives laid down in Community legislation. In addition to participating in the Board's decisions, the NRAs will also be responsible for implementing the actual resolution measures.
The NRAs remain responsible for managing crises in financial institutions that are less systemically important. In the performance of these activities, they act in accordance with the guidelines established by the SRB, which in exceptional circumstances can act in lieu of the national authorities, ensuring the Mechanism's integrity.
Both the SRB and the NRAs use the resolution tools introduced under EU Directive No. 59/2014 (Banking Recovery and Resolution Directive - BRRD).
Italy's Legislative Decree 72/2015 and the 2014 European Delegation Law, approved on 2 July 2015, conferred the functions of National Resolution Authority on the Bank of Italy. The Bank has accordingly established a Resolution and Crisis Management Unit, which carries out the preliminary and operational tasks envisaged by the Single Resolution Mechanism, cooperates with the SRB's offices, and manages the liquidation procedures for banks and investment firms.
The Single Resolution Fund
The Single Resolution Fund (the Fund) is an essential part of the Single Resolution Mechanism (SRM), which harmonizes the resolution procedures for credit institutions and some investment firms within the 19 member states of the euro area.
The Single Resolution Board, the governing body of the SRM, is responsible for managing the Fund, which was established to ensure that funding is available for resolutions.
The Fund will be financed by contributions from the banking sector and some investment firms established in the member states participating in the Banking Union.
Funds will be raised at national level and then pooled at Union level in accordance with the Intergovernmental Agreement on the transfer and mutualisation of contributions to the SRM.
The target level of the Fund has been set at 1 per cent of the covered deposits of all euro-area banks. This target will be reached by the end of a period of eight years from 1 January 2016.
The individual ex ante contributions to the Fund will be paid in annually by the banks falling within the scope of the SRM. Where ex ante contributions are not sufficient to cover the losses or the costs to be borne by the Fund, additional contributions may be raised.
The Bank of Italy as National Resolution Authority is responsible for the collection and transfer of contributions to the Fund.