Legislation

The Banking Union aims to harmonise the supervision, resolution and deposit guarantee schemes for all participating (Banking Union) Member States.

The first pillar of Banking Union is the Single Supervisory Mechanism (SSM) which is comprised of the European Central Bank (ECB) and the national prudential supervisory authorities. The ECB fully assumed direct supervisory responsibility for significant credit institutions in participating Member States on 4 November 2014.

The Bank Recovery and Resolution Directive (BRRD) is an EU framework which governs the resolution of both credit institutions and in-scope investment firms. The European Union (Bank Recovery and Resolution) Regulations 2015 (S.I. No 289 of 2015) came into effect on 15 July 2015 (with the exception of the bail-in tool which came into effect on 1 January 2016) and transposed the BRRD into Irish law. BRRD laid the foundation for the second pillar of Banking Union, the Single Resolution Mechanism (SRM), which is now comprised of the Single Resolution Board (SRB) and the national resolution authorities. The SRB is established by the SRM regulation, and is a fully independent EU agency acting as the central resolution authority within the Banking Union.

The third pillar of Banking Union comprises the Deposit Guarantee Scheme (DGS) Directive and, in future, a European deposit insurance scheme (EDIS). The DGS Directive is transposed into Irish law via the European Union (Deposit Guarantee Schemes) Regulations 2015 (S.I. No 516 of 2015). EDIS remains under political negotiation at EU level.

The Central Bank and Credit Institutions (Resolution) Act 2011 (CBCIR) is national legislation enacted in 2011 to govern the resolution of banks and credit unions, but due to the introduction of the BRRD in 2015 the CBCIR now only governs the resolution of credit unions.

The Resolution Division relies on at least the above legislation to ensure that the resolution of institutions, in-scope investment firms and credit unions are dealt with in a timely, transparent and effective manner to safeguard against exchequer funds being used in resolution cases.