Lucia Quaglia hints at “a convoluted decision-making process” on banking resolution
Speaking on the sidelines of a talk given at Scuola Normale Superiore in Palazzo Strozzi (Florence), Lucia Quaglia, Professor of Political Science at the University of York (UK) reviewed the entangled governance of the Single Resolution Mechanism (SRM), and stressed that ‘the most convoluted part of the process is how to take decisions within the Single Resolution Board’. More specifically, Quaglia pointed at the number of policy actors involved in the process and concluded that, going forward, there could be some ‘lack of clarity as to who is responsible’.
“The decision-making process on resolution – within the Single Resolution Mechanism – is indeed very convoluted. There are several different policy actors involved, the ECB, the Commission, the Single Resolution Board, national resolution authorities and also the Council of Ministers. I think that there can potentially be some lack of clarity as to who is responsible, who is actually taking the final decision”
Professor Quaglia also examined the intricacies of the UK’s position on the EU Banking Union. Going beyond the obvious political reason why the UK is not part of the Banking Union (the UK decided not to join EMU in 1999), she also underscored the chief importance of economic factors and in particular the structure of the EU banking system in explaining the reluctance of the UK to join the SRM: the UK’s banking system ‘is a system that is very internationalized rather than just Europeanized’.
Putting things in the larger perspective of open economies facing interdependence pressures, Lucia Quaglia went on and explained that ‘by and large, all countries regardless whether they are in the euro area or even in the European Union, face what some economists call a financial trilemma, between the stability of the financial sector, international financial integration and national policies for the regulation, resolution and supervision of banks’. An additional constraint for euro area countries, she added, is that ‘the lender of last resort is no longer at the national level but hasn’t really been moved to the EU level’.