Table Of Contenti
EUROPEAN BANKING UNION
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OXFORD EU FINANCIAL REGULATION SERIES
The Oxford EU Financial Regulation Series provides rigorous analysis of all aspects of EU
Financial Regulation and covers the regulation of banks, capital markets, insurance
undertakings, asset managers, payment institutions and financial infrastructures.
The aim of the series is to provide high- quality dissection of and comment on EU
Regulations and Directives, and the EU financial regulation framework as a whole.
Titles in the series consider the elements of both theory and practice necessary
for proper understanding, analysing the legal framework in the context of its practical,
political and economic background, and offering a sound basis for interpretation.
Series Editors:
Danny Busch
Professor of Financial Law and founding Director of the Institute for Financial Law,
Radboud University Nijmegen;
Research Fellow of Harris Manchester College and Fellow of the Commercial Law Centre,
University of Oxford;
Visiting Professor at Università Cattolica del Sacro Cuore di Milano;
Visiting Professor at Università degli Studi di Genova;
Visiting Professor at Université de Nice Côte d’Azur;
Member of the Dutch Banking Disciplinary Committee (Tuchtcommissie Banken);
Member of the Appeal Committee of the Dutch Complaint Institute Financial Services
(Klachteninstituut Financiële Dienstverlening or KiFiD).
Guido Ferrarini
Emeritus Professor of Business Law, University of Genoa;
Visiting Professor, Radboud University Nijmegen;
Founder and fellow of the European Corporate Governance
Institute (ECGI), Brussels;
Former member of the Board of Trustees, International Accounting
Standards Committee (IASC), London.
Previous volumes published in the series:
Governance of Financial Institutions, Edited by Danny Busch, Guido Ferrarini,
and Gerard van Solinge, January 2019, 9780198799979
Capital Markets Union, Edited by Danny Busch, Emilios Avgouleas, and
Guido Ferrarini, March 2018, 9780198813392
Regulation of the EU Financial Markets – MiFID II and MiFIR, Edited by
Danny Busch and Guido Ferrarini, January 2017, 9780198767671
European Banking Union, First Edition, Edited by Danny Busch and
Guido Ferrarini, July 2015, 9780198727309
Alternative Investment Funds in Europe – Law and Practice, Edited by
Lodewijk van Setten and Danny Busch, May 2014, 9780199657728
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EUROPEAN
BANKING UNION
SECOND EDITION
Edited by
Danny Busch
Guido Ferrarini
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Second Edition published in 2020
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PREFACE
This second edition of European Banking Union offers a thorough revision and
expansion of the first edition of this work.
The book chapters are grouped in a thematic way, covering the following areas: (i)
general aspects; (ii) single supervision and the Capital Requirements Directive
(CRD IV); (iii) single resolution and the Bank Recovery and Resolution Directive
(BRRD); and (iv) the European Deposit Insurance System (EDIS) and policy
perspectives.
Part I discusses the economic consequences of the European Banking Union
(EBU), its effectiveness, impact and future challenges, as well as judicial protec-
tion in the context of EBU’s Single Supervisory Mechanism (SSM) and Single
Resolution Mechanism (SRM).
Part II considers the SSM’s institutional aspects, the interplay between the Single
Rulebook and the SSM, the CRD IV framework for bank’s corporate governance,
fit and proper assessments within the SSM, and the EU framework dealing with
non- performing exposures.
Part III analyses the governance structure of the SRM, particularly with respect
to financing of the Single Resolution Fund and adoption of resolution schemes.
Moreover, it discusses the function of existing recovery and resolution plans in the
context of a bank restructuring under the BRRD and the SRM Regulation, and
then provides an in- depth analysis of the bail- in instrument. This part also features
a critical discussion of the recent bank resolution cases in Europe, as well as an
analysis of the architecture of the BRRD from a UK perspective including Brexit
Part IV discusses the envisaged EDIS, followed by a treatment of the so-c alled
‘doom loop’ between sovereign and banking risk. In this part, it is also argued
that the work of EBU remains incomplete in one important respect, the structural
re- organization of large European financial firms that would make ‘resolution’ of
a systemically important financial firm a credible alternative to bail-o ut or some
other sort of taxpayer assistance. The book ends with a treatment of the complex
topic of supervision of financial conglomerates in the context of EBU.
The volume was preceded by a meeting on 20 October 2017 of the International
Working Group on the European Banking Union, established as a joint initiative
of the Institute for Financial Law within the Business & Law Research Centre of
Radboud University, Nijmegen, the Netherlands and the Genoa Centre for Law
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Preface
and Finance, University of Genoa, Italy. We thank the Business & Law Research
Centre of Radboud University, Nijmegen and the European Banking Institute
(EBI), Frankfurt, Germany, for their sponsorship and support. We also thank
Università Cattolica del Sacro Cuore di Milano and its Vice- Rector Professor
Antonella Sciarrone Alibrandi for hosting the meeting. We are grateful to the
distinguished members of the Working Group for their dedication to the project
and, in particular, for their contributions to this book as authors. We also thank
the invitees to the meeting for providing the members of the Working Group with
invaluable comments on their draft chapters.
Last but not least, we acknowledge our gratitude to the editorial team at Oxford
University Press, who successfully brought a lengthy and complex project to
completion.
The law is stated as of 1 May 2019.
Danny Busch,
Nijmegen, The Netherlands
Guido Ferrarini,
Genoa, Italy
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CONTENTS
Table of Cases xiii
Table of Legislation xvii
List of Abbreviations xli
Author Biographies xlv
List of Contributors xlvii
I GENERAL ASPECTS
1. The Economic Consequences of Europe’s Banking Union
Nicolas Véron
I. The Impact so Far: A Shift of Expectations 1.03
II. Six Developments to Watch 1.20
III. Conclusion 1.64
2. European Banking Union: Effectiveness, Impact, and Future Challenges
Kern Alexander
I. Introduction 2.01
II. Single Supervisory Mechanism— Setting the Context 2.05
III. SSM and EU Agencies and Institutions 2.31
IV. Bank Resolution, the SSM, and the Single Resolution
Board (SRB) 2.49
V. SSM, Macroprudential Tools, and National Competent
Authorities 2.67
VI. Member State Perspectives on the SSM 2.114
VII. Banking Union and the Banking Industry 2.121
VIII. Conclusion 2.136
3. Judicial Protection of Supervised Credit Institutions in
the European Banking Union
Tomas M C Arons
I. Introduction 3.01
II. Judicial Protection for Credit Institutions under the SSM 3.07
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Contents
III. Judicial Protection for Credit Institutions under the SRM 3.37
IV. Substantive Review by the CJEU 3.66
V. Liability of the ECB and the SRB 3.86
VI. Conclusion 3.94
II SINGLE SUPERVISION AND CRD IV
4. The Single Supervisory Mechanism for Banking
Supervision: Institutional Aspects
Eddy Wymeersch
I. Historical Introduction 4.01
II. The New Regulatory Framework: The Banking Union 4.09
III. Applicable Bodies of Law in Banking Supervision 4.15
IV. The Choice of the ECB as the Prudential Supervisor 4.31
V. Application to the Euro Area or Beyond? 4.38
VI. The Single Supervisory Mechanism 4.46
VII. Legal Position of the Supervisory Board in the ECB 4.104
VIII. Independence and Accountability 4.114
IX. Review of SSM Decisions 4.136
X. Conclusion 4.143
5. The Single Rulebook and the SSM: Regulatory Polycentrism vs.
Supervisory Centralization
Guido Ferrarini and Fabio Recine
I. Introduction 5.01
II. A Short History of the EU Regulatory Framework 5.04
III. The Allocation of Regulatory and Supervisory Powers 5.17
IV. The Decoupling of Regulatory and Supervisory Powers in
the SSM 5.28
V. Evolutionary Dynamics of the EU Institutional Regulatory
Framework 5.53
VI. Conclusion 5.68
6. CRD IV Framework for Banks’ Corporate Governance
Peter O Mülbert and Alexander Wilhelm
I. Introduction 6.01
II. Banking Structures in the European Union 6.03
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III. Historical Development 6.05
IV. CRD IV Corporate Governance Standards 6.10
V. Conceptual Concerns 6.46
VI. Functional Concerns 6.87
VII. Conclusion and Outlook 6.106
7. Fit and Proper Assessments within the Single Supervisory Mechanism
Danny Busch and Annick Teubner
I. Introduction 7.01
II. Key Terms and Definitions 7.02
III. Fit and Proper Assessments as an Element of
Corporate Governance 7.06
IV. Division of Responsibilities Between the Banks, the ECB,
and the NCAs 7.11
V. Relevant Sources of Substantive Requirements 7.23
VI. Convergence 7.28
VII. National Variations and Limits 7.78
VIII. Concluding Observations 7.96
8. The EU Framework Dealing with Non- Performing
Exposures: Legal and Economic Analysis
Emilios Avgouleas
I. Introduction 8.01
II. Causes and Consequences of NPL Accumulations 8.14
III. Structural Measures 8.21
IV. Market- based Solutions: Asset Management Companies
and NPL Platforms 8.31
V. Prudential and Supervisory Policies for Tackling NPLs 8.38
VI. Conclusion 8.57
III SINGLE RESOLUTION AND THE BRRD
9. Governance of the Single Resolution Mechanism
Danny Busch
I. Introduction 9.01
II. General Aspects 9.04
III. Financing of the Fund 9.46
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