Since its creation at the beginning of 2016, the Single Resolution Fund (SRF) had accumulated an envelope of €17 billion by the end of June, fed in by more than 3,500 banking and financial establishments, the Single Resolution Board (SRB) announced on Wednesday 19 July.
The SRF, which was created in early 2016, is the financial arm of banking union in the Eurozone. Triggering it, which constitutes a last-resort decision, aims to allow the resolution of a failing Eurozone bank without its critical functions - managing bank deposits, lines of credit to business - being affected. However, the fund may only intervene following a 'bail-in' of the bank and up to a limit of 5% of the total liabilities of the bank in question.
So far, the SRF has not been mobilised in the resolution of the Spanish bank Banco Popular (see EUROPE 11803).
The total firepower of the SRF is being built up over a period of eight years: the objective laid down in European law is for it to have an envelope of more than €50 billion by the end of 2013, or 1% of bank deposits covered. In the meantime, credit line agreements have been concluded between the SRB and the Eurozone countries to allow the intervention capacity of the fund to reach the target laid down, if necessary.
In the framework of European work on reducing and sharing financial risks, the nineteen have started discussions on creating a backstop for the SRF, as Germany refuses to agree to make the European Stability Mechanism (ESM) the permanent bailout fund of the Eurozone, taking on this role.
These negotiations are expected to conclude by the end of 2023 at the latest. A further victory for Angela Merkel's CDU party in the German general elections at the end of September could help to speed up the finalisation of banking union in the Eurozone, with the creation of the European Deposit Insurance System (EDIS) as well. (Original version in French by Mathieu Bion)