Overview
The Single Resolution Mechanism (SRM) is one of the two pillars of the banking union, alongside the Single Supervisory Mechanism. It applies to banks established in participating Member States (the euro area plus any Member State that opts in) and provides a uniform framework for planning and executing the resolution of institutions that are failing or likely to fail. Its purpose is to ensure that bank failures are handled in an orderly way that protects financial stability and limits recourse to taxpayer funds.
How it works
The SRM combines a central authority with national bodies. The Single Resolution Board (SRB) is the central resolution authority; it works together with the national resolution authorities of participating Member States, which execute decisions and retain direct responsibility for smaller, less significant institutions. The mechanism is backed by the Single Resolution Fund, financed by ex-ante contributions from the industry, which can be used to support the application of resolution tools.
Responsibility is divided by institution. The SRB directly plans and, where necessary, resolves the most significant banks: those under direct ECB supervision, other cross-border groups, and any bank in respect of which it decides to exercise its powers. National resolution authorities handle the remaining, less significant institutions, though the SRB may step in and take over a case at any time to ensure the consistent application of the framework. For each significant group an internal resolution team, led by the SRB and staffed jointly with the relevant national authorities, carries out day-to-day resolution planning.
Within a resolution case the SRM interacts with the European Commission and the Council of the EU. The SRB adopts a resolution scheme, which enters into force subject to a defined process of endorsement by the Commission and, in specified circumstances, the Council, reflecting the constraints of EU institutional law on the delegation of discretionary powers.
Legal basis
The SRM is established by the SRM Regulation (Regulation 806/2014). It sets out the objectives and scope of the mechanism, the division of tasks between the SRB and national resolution authorities, and the substantive resolution powers, which mirror those of the BRRD applied at banking-union level. The SRM Regulation should be read together with the BRRD, which provides the common substantive rules for the whole EU.
Relevance for banks and investors
For a bank in a participating Member State, the SRM determines which authority plans its resolution, sets its MREL, and would execute any resolution action. For investors, the identity of the resolution authority and the group's resolution strategy shape where loss-absorbing capacity sits and how a bail-in would be sequenced. Understanding whether a given entity falls under the SRB directly or under a national resolution authority is therefore central to analysing an issuer's resolution risk.