By Barbera Reisenhofer and Daniela Jaros
While the Eurozone crisis started as banking crisis which turned into a sovereign debt crisis simultaneously leading to the crisis of the monetary union, the first measures taken (bilateral loans to Greece, the EFSF, the ESM, the ECB’s SMP and later OMTs, the Six-Pack and the TSCG) were primarily meant to stabilize and contain the ongoing crisis. The Banking Union, however, completed through the recent agreement on the Single Resolution Mechanism (SRM), is a further, forward-looking step. More than to contain, it is meant to prevent crises of the kind just experienced. It has rightly been described as the most ambitious integration project since the creation of the single currency as it leads to its members transferring the control of their biggest banks to the supranational level.
The Banking Union consists of two pillars – the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). Continue reading
Directive 94/19/EC on deposit-guarantee schemes, which has also been transposed into EEA law, obliges EU and EEA EFTA states to create deposit-guarantee schemes. Deposit-guarantee schemes reimburse a limited amount of deposits to depositors where their bank has failed. The purpose is to protect a part of depositors’ wealth from bank failures, and thus to prevent depositors from making panic withdrawals from their bank with potentially dire economic consequences. In the present case, the EFTA Court was confronted with an action by the EFTA Surveillance Authority against Iceland. The Authority claimed that Iceland had violated the transposed Directive and thus EEA law in the aftermath of its major economic crisis and collapse of the banking sector in 2008, by failing to ensure that British and Dutch depositors using the famous ‘Icesave’ accounts offered by Icelandic banks received the minimum amount of compensation set out in Article 7(1) of the Directive. In a rather surprising decision handed down on Monday this week, the Court interpreted the Directive very narrowly, effectively finding that Iceland had not failed to comply with its obligations under EEA law. Continue reading