Bulgaria and Croatia will join the Single Resolution Mechanism, following a decision by the European central bank to accept the two states in the Exchange Rate Mechanism (ERM II), the mandatory training grounds for the euro adoption, the central resolution authority within the EU's Banking Union said.
On Friday, the European Central Bank (ECB) announced it is accepting the two states to the ERM II as of July 13 and establishing close cooperation with the respective national banks, which are also simultaneously joining the Banking Union. “We are happy to welcome two new members to the Single Resolution Mechanism and have been working closely with the Bulgarian and Croatian authorities to prepare for this Banking Union milestone,” the head of the Single Resolution Board (SRB), Elke Konig, said in a statement on Monday.
The SRB comprises the 19 eurozone states and together with the national resolution authorities forms the Single Resolution Mechanism (SRM). The SRB works closely with the ECB, the European Commission, the European Banking Authority and national authorities, aiming to ensure an orderly resolution of failing banks, protecting the taxpayer from state bail-outs, and promoting financial stability.
As of October 1, 2020, the ECB will start a direct supervision over the largest banks in Bulgaria and Croatia, which are known as significant institutions, and the SRB will become the resolution authority for these and all cross-border groups, while also overseeing resolution planning for smaller banks in the two countries, known as less significant institutions. The SRB and the national resolution authorities in Bulgaria and Croatia are well prepared for a smooth transition to the new resolution regime, with banks and investment firms in the two countries also expected to contribute to the Single Resolution Fund (SRF), the SRB statement reads.
The SRF is composed of contributions from credit institutions and investment firms from all Banking Union member states, and may be used to ensure the efficient application of resolution tools and the exercise of the resolution powers conferred to the SRB by the SRM Regulation. The SRF ensures that the financial industry as a whole guarantees the stabilisation of the financial system.