Banking Union

Topic Guides

Banking Union is a project between the EU Member States in the eurozone to establish a common supervisory and resolution framework for euro-area banks. Non-euro-area Member States may also join the Banking Union should they wish to.

This Topic Guide helps you navigate the legislation through which Banking Union is being implemented and allows you easy access to briefing notes and other materials prepared by Clifford Chance's team of financial regulation experts.

Inside this Topic Guide

Topic overview and current status

Banking Union comprises the following elements:

the Single Supervisory Mechanism (SSM), which makes the European Central Bank (ECB) the common supervisor for euro area banks with direct supervisory responsibility for "significant" SSM banks. For less significant SSM banks, national supervisors are responsible for day-to-day supervision subject to the control of the ECB;
the Single Resolution Mechanism (SRM), which is a system for resolving failing euro area banks and applies the Bank Recovery and Resolution Directive (BRRD) to SSM banks in a uniform manner via a Single Resolution Board (SRB) and a shared fund to cover costs paid for by banks (Single Resolution Fund - SRF); and
a proposed European Deposit Insurance Scheme (EDIS) – in November 2015 the Commission presented a legislative proposal for a system initially based on reinsurance, which will keep in place Member States' national schemes established under the recast Deposit Guarantee Scheme Directive (DGSD2).

In addition, the system is underpinned by a facility for the direct recapitalisation of failing banks by the European Stability Mechanism (ESM).

Details of legislation establishing the Banking Union are available in the legislation section of this guide.

The SSM and the SRM also include non-euro area Member States with which the ECB has established close cooperation arrangements (currently, Bulgaria and Croatia are also participating Member States).

Fundamentally, the aim of the SSM and SRM is to ensure uniform implementation within the participating Member States of the "single rulebook" being the broader set of legislative instruments with which all EU banks (inside and outside the euro area) must comply including:

Capital Requirements Directive/Regulation (CRD / CRR) (as amended, including by CRDV / CRR2)
Bank Recovery and Resolution Directive (BRRD) (as amended, including by BRRD2)
Deposit Guarantee Schemes Directive 2 (DGSD2)

Under the draft Investment Firms Directive (IFD) and Investment Firms Regulation (IFR) some systemically important investment firms may be reclassified as credit institutions and therefore become subject to the SSM.

Status:

SSM – Established by SSM Regulation and EBA Amending Regulation - both in force since autumn 2013. ECB began direct supervision of significant banks and began oversight of SSM on 4 November 2014.

SRM – Regulation establishing SRM entered into force on 19 August 2014 with different sections applying from dates between December 2014 and January 2016 (see below). Council Implementing Regulation on contributions of banks to the SRF published in 2015 applied from 1 January 2016. Regulation amending the SRM Regulation (SRMR2) was published in the Official Journal on 7 June 2019 and applied from 28 December 2020.

EDIS – Commission launched legislative proposal for Regulation amending the SRM Regulation to establish a European Deposit Insurance Scheme on 25 November 2015.

In June 2019, the EU Commission published a communication taking stock of progress made to deepen Europe's Economic and Monetary Union and calling for a renewed effort to complete the Banking Union. In June 2019 the EU Council Presidency also published a progress report. The most recent EU Council Presidency progress report dated 2 June 2021 was published on 18 June 2021.

SRMR2 applied from 28 December 2020.

EU Council and EU Parliament are considering the Commission's legislative proposal for the EDIS through the ordinary legislative process.

IFR and IFD (which reclassifies certain systemically important investment firms as credit institutions) was published in the Official Journal on 5 December 2019 and applied from 26 June 2021.

The European Commission published a BRRD/SRMR/DGSD review roadmap on 11 November 2020 and launched a technical consultation on the revision of the EU's crisis management and deposit insurance (CMDI) framework on 26 January 2021 and a public consultation on 25 February 2021. The SRB published its response to the technical consultation on 22 April 2021, and a blueprint from the CMDI review on 18 May 2021. The Commission is expected to adopt legislative proposals in late 2022 or early 2023.

Clifford Chance contacts

Marc Benzler (Frankfurt)	Frank Graaf (Amsterdam)
Chris Bates (London)	Steve Jacoby (Luxembourg)
Lucio Bonavitacola (Milan)	Frédérick Lacroix (Paris)
José Manuel Cuenca (Madrid)	Caroline Meinertz (London)
Caroline Dawson (London)	Deborah Zandstra (London)
Simon Gleeson (London)

CMDI framework review

On 18 April 2023, the European Commission published a package of proposals to reform the crisis management and deposit insurance (CMDI) framework relating to banks and other credit institutions, as set out in the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), Single Resolution Mechanism Regulation ((EU) 806/2014) (SRMR) and Deposit Guarantee Schemes Directive (2014/49/EU) (DGSD).

The Commission has invited the European Parliament and Council to reach agreement on the proposed reform of the CMDI framework before the next Parliamentary elections in 2024. In its communication, it also noted the complementarity between the proposed CMDI reforms and the 2015 proposal for a European deposit insurance scheme (EDIS), with political negotiations on the latter stalled, and suggested that a renewed effort to reach a political agreement on EDIS should be a priority.

Proposed amendments to the SRMR relate to issues including the public interest assessment (PIA) and the use of DGS in resolution