SAFE Policy Blog

Credibility of EU Bank Resolution Framework Boosted

Jan Krahnen greets takeover of Spanish Banco Popular and hopes that this example is followed in Italy

A special day for Europe’s new financial architecture: textbook-like and exactly as intended by the EU Recovery and Resolution Directive (BRRD), the European Banking Supervision (SSM) and the Single Resolution Mechanism (SRM) have apparently worked closely together and caused the exit of an ailing bank out of the Spanish market. The takeover of Banco Popular by Santander – an internationally very successful Spanish bank – allows for an immense cost cutting in the medium term, including an increased profit expectation for Santander. Even if not all details are known yet, one can already state: The BRRD has passed its first real test, the credibility of the European liability regulation has increased substantially. We now have to hope that this success will serve as an example for Italy’s crisis banks.