As a reminder, the European Banking Union is built on three pillars: supervision, resolution and a deposit guarantee system.
The first, and oldest, entails the creation of a single system of bank supervision.
The second pillar was introduced with the "BRRD" directive on banking crisis resolution and a regulation on the creation of a single resolution mechanism (SRM) for systemic banks establishing a Single Resolution Board (SRB) responsible for resolution decisions and a Single Resolution Fund (SRF) to help finance them. The SRF will be funded by specific contributions from the relevant institutions, which are expected to total approximately €55 billion by the end of 2023. This mechanism was created to take rapid and effective resolution measures for cross-border banking groups within the Banking Union.
The "BRRD" directive on banking recovery and resolution adopted on 15 May 2014 (2014/59/UE) and the SRM regulation introduced powerful Europe-wide crisis resolution instruments, particularly for systemic crises. Under this new framework, deposit guarantee schemes have greater resources than they had previously, and only to create non-systemic local crises.
The "BRRD" directive sets out the conditions under which a systemic bank or a bank whose failure would have significant repercussions on the economy may be subject to a resolution mechanism. This mechanism is based on plans previously defined by the institutions and approved by the authorities. It lays down rules for the use of various tools, including the creation of a bridge bank to extract and resell healthy assets, the separation of assets, run-off management of non-essential assets and a bail-in tool. This directive also calls for the creation of a European resolution fund (SRF) that is responsible for some of the funding of the resolution.
Lastly, the third pillar concerns the deposit guarantee scheme with, in 2014, a directive on the European deposit guarantee systems "DGSD2" which significantly reinforced and harmonised depositors' protection within the Union: particularly by the reduction in the compensation time to 7 working days, the compensation of temporary extraordinary deposits, and new mandatory information on customers.
At the end of 2015, the European Commission proposed a draft regulation on the funding, reinsurance and co-insurance of national deposit guarantee funds in the Euro zone. The work begun in Brussels on this draft is still under way. It includes an important component aimed at reducing the risks of the national banking sectors as a precondition for partially or totally collective financing.