The Banks Recovery and Resolution Directive sets predictable and credible rules in the event of bank failure in EU member states and establishes solid ex-ante financing for national resolution funds, to be financed by banks. The adoption of this framework is a condition of the Single Resolution Mechanism. After six months of negotiation with the Council, the European Parliament reached a first-reading agreement on 11 December.
Some key features of this overall package are as follows. The competent authority (supervisor) will be able to determine whether an institution is failing or likely to fail. Member states may, in some circumstances, also empower the resolution authority to reach that decision after consulting with the competent authority. A bail-in regime would apply before any intervention from the resolution fund, with individuals and small businesses to get most protection in the event of claims. Public intervention would be limited and restricted, with only specific and temporary support measures allowed, and only subject to state aid rules and after an adequate bail-in process.