Publication

This commentary evaluates the agreement reached in the EU in March 2014 regarding how to deal with banks in difficulty in the eurozone. This agreement, which will be the basis of an intergovernmental treaty, envisages the creation of a common Single Resolution Fund financed by banks themselves and run by a Single Resolution Mechanism with participation from the European Central Bank. The author argues that despite leaving unresolved problems, the end result of the agreement is likely to be quite strong because it establishes a key innovation: a common fund that effectively mutualizes much of the risk resulting from bank failures.