28 November 2019

European Commission: Study on the differences between bank insolvency laws and on their potential harmonisation

The study aims to describe and compare the national bank insolvency frameworks of Member States, as well as to assess the potential benefits of a more harmonised insolvency regime for banks.

The issue of the harmonisation of national insolvency laws as applicable to banks, including both winding-up and reorganisation of banks, has become increasingly relevant in the policy debate on the treatment of bank crises.

With the adoption of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), European co-legislators introduced in 2014 harmonised rules for the crisis management of banks, setting out a framework to tackle non-viable credit institutions which are deemed to be of public interest.

These initiatives stem from the overall consideration that, due to the central role of banks in the economy as well as the general interconnectedness of the sector, bank failures may turn into systemic events which require consistent and coordinated regulatory action to allow early interventions and/or resolution and so avoid, when justified, normal insolvency proceedings. To this end, a harmonised resolution framework for the EU was adopted, as well as a single resolution mechanism for the euro area. The resolution framework provides extensive and effective tools to ensure the continuity of the institution’s critical functions. The new EU framework also contains measures to further improve the achievement of coherent action within the Banking Union by creating a European resolution authority (the Single Resolution Board) as well as a Single Resolution Fund.

When it is assessed that resolution of a bank is not in the public interest, the BRRD and the SRMR stipulate that national laws apply. Within the EU, these national insolvency regimes (specific or not to banks depending on member states) differ substantially from one another.

The results of this study will feed into the Commission’s analysis of potential further action to improve the available tools to address bank failures. This study has been conducted pursuant to a European Parliament Pilot Project on the Banking Union.

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