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The EU has taken significant steps to address the root causes of the financial crisis, to ensure that banks are now much better capitalised and more effectively supervised and to identify risks that may be building in the system. But despite closer supervision and a greater emphasis on crisis prevention, there may still be cases of banks getting into difficulty. The SRM Regulation establishes the framework for Member States participating in the Banking Union when banks need to be resolved.
Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union said: "The Banking Union already has the tools it needs to supervise the banks within the euro area. As of 1st January, the Single Resolution Mechanism will now also be in place. This means that we now have a system for resolving banks and of paying for resolution so that taxpayers will be protected from having to bail out banks if they go bust. No longer will the mistakes of banks have to be borne on the shoulders of the many."
The SRM provides that the Single Resolution Fund (SRF) will be built up over a period of 8 years with 'ex-ante' contributions from the banking industry. Member States agreed to define some of the rules, particularly relating to the transfer of those contributions from National Resolution Authorities to the SRF, and for the progressive mutualisation of their use over time, in an inter-governmental agreement (IGA). The IGA was part of the overall compromise reached by the Member States and the European Parliament on the SRM in March 2014, and sits alongside the SRM Regulation (IP/15/6258). It was ratified by a sufficient number of participating Member States on November 29.
The Banking Union is mandatory for all euro area states and consists of 19 members: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. If Member States chose to join the Banking Union, they need to join the three parts: supervision, resolution, EDIS.