There are several questions still to be addressed in the full implementation of the agreed Banking Union actions. This remains a source of potential vulnerability that so far has not been addressed by the many reforms of the euro area or the banking legislation. This note explores possible ways to deal with the situation.
One of the key aspects of the Single Resolution Mechanism (SRM) is the creation of a Single Resolution Fund (SRF), financed by bank contributions. In the initial phase, the Fund is composed of ‘national compartments’, which will be merged after a transitional period of eight years.
A common deposit insurance scheme, on the other hand, would increase resilience against future crises. Consequently, the Five Presidents’ Report proposed setting up a European Deposit Insurance Scheme (EDIS) as the third pillar of a fully-fledged Banking Union, alongside bank supervision and resolution.