The proposed EU recovery and resolution plan regime and its practical implications on the German banking industry

Christian Alexander Mecklenburg-Guzmán Mayer Brown LLP, Frankfurt

Introduction

During the recent economic crisis it became evident that the absence of preparation inevitably leads to delays. When the competent authorities were faced with ailing financial institutions, the only feasible solution was to commit a vast proportion of the national budget to bail these organisations out. During the course of the crisis, legislative amendments introduced improved mechanisms to deal with the challenges the recession imposed.[1] These measures are extraordinary in nature and are consequently limited in terms of time, and differ greatly within the European Union. The expiry of the recovery and resolution measures, as well as fragmentation, may again pose significant problems in future. The European Commission reacted in hindsight by publishing two communications on 20 October 2009 and 20 October 2010. These presented a cross-border mechanism that is capable of ameliorating and remedying any deficiencies encountered.[2]