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This article analyses the EU legal and institutional structure of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) of the European Banking Union (EBU). The Banking Union represents an unprecedented transfer of sovereignty from participating Member States to an EU institution for conducting banking supervision and for delegating authority to an EU agency to have responsibility for the preparation, implementation and funding of a European bank resolution regime. The article examines the legal basis of the SSM in the Lisbon Treaty and considers whether the ECB's strong form of independence is appropriate for its role as a bank supervisor, and whether its limited powers to take macro-prudential regulatory and supervisory measures are adequate to ensure banking sector stability. The article further argues that the SRM provides an important institutional step to build a more effective European bank resolution framework, but it suffers from institutional weaknesses and legal uncertainty regarding the use of resolution tools that undermine its ability to manage a bank resolution. The article concludes that a more effective banking regulation and resolution regime in the Banking Union requires a sounder legal basis in the EU Treaty that would empower the ECB to have full powers to conduct macroprudential supervision and to co-ordinate more with the Single Resolution Board (SRB) in the use of resolution powers, but subject to strict criteria established in law.
