The Bank for International Settlements’ Financial Stability Institute published an Occasional Paper assessing how the European banking union’s resolution regime operates and what would be needed to make it more efficient. It finds that the framework has managed idiosyncratic bank failures, but that avoidable procedural and regulatory complexity undermines efficiency relative to other major jurisdictions and can also limit how effectively the Single Resolution Mechanism supports banking union objectives. The paper attributes key sources of complexity to the EU’s legislative and institutional set-up, including multi-step decision-making and coordination across authorities, the coexistence of EU resolution rules with unharmonised national insolvency regimes, and granular requirements for resolution funding and minimum requirement for own funds and eligible liabilities (MREL). It highlights, among other factors, the requirement for European Commission endorsement of resolution schemes within 24 hours (and potential European Council involvement), the need to reconcile public interest assessments and “no creditor worse off” analysis with diverse national insolvency outcomes, and constraints on access to mutualised funding such as the Single Resolution Fund, including the 8% bail-in precondition and the 5% cap. Reform options discussed include legislative steps to broaden the use of resolution relative to insolvency, reduce frictions at the resolution–insolvency boundary, strengthen common funding arrangements (including discussion of a European deposit insurance scheme), and simplify MREL calibration by aligning it more closely with simpler approaches used elsewhere and by better reflecting the availability of external, industry-sourced funding for transfer strategies. While noting ongoing simplification work by the Single Resolution Board and European Banking Authority on resolution planning and reporting requirements, the paper argues that these “easy fixes” would deliver only limited gains without determined legislative action to address the framework’s structural drivers of complexity.
Bank for International Settlements - Financial Stability Institute 2026-03-20
Bank for International Settlements' Financial Stability Institute paper calls for legislative reforms to simplify the European banking union resolution framework
The Bank for International Settlements’ Financial Stability Institute published an Occasional Paper evaluating the European banking union’s resolution regime, highlighting procedural and regulatory complexities. The paper identifies issues like multi-step decision-making, unharmonised national insolvency regimes, and constraints on mutualised funding access. It suggests reforms to broaden resolution use, reduce resolution–insolvency boundary frictions, and strengthen common funding arrangements.