Comparisons: the European Union and the United Kingdom

The European Union: BRRD and the Single Resolution Mechanism

Because the Swiss regime was developed in parallel with the resolution frameworks of the European Union and the United Kingdom, the comparison illuminates both its strengths and its peculiarities. The European Union adopted the Bank Recovery and Resolution Directive in 2014. Directive 2014/59/EU harmonised the resolution tools available to national authorities, including the sale of business, the bridge institution, the separation of assets and the bail-in. For the euro area, Regulation (EU) No 806/2014 established the Single Resolution Mechanism with a central authority, the Single Resolution Board, as well as a Single Resolution Fund financed by the banks. The mechanism became fully operational on 1 January 2016. Under the directive, shareholders and creditors must bear losses equal to at least 8 per cent of total liabilities before the resolution fund can contribute. The fund itself was intended to reach about EUR 55 billion, corresponding to 1 per cent of covered deposits.¹

The European framework differs from the Swiss one in three respects. First, it is based on a directive that gives resolution authorities a broad menu of tools and requires them to apply resolution whenever a bank is failing or likely to fail, when no private alternative is available and when resolution is in the public interest. The Swiss framework left the authorities with discretion over whether to use the restructuring instrument at all, a discretion they exercised in March 2023. Secondly, the European system possesses a common resolution fund that can provide limited financial support to a bank in resolution. Switzerland had no such fund and relied, after 2023, on the public liquidity backstop provided by the SNB with a federal guarantee. Thirdly, the requirement for loss-absorbing instruments in the EU, known as MREL, is determined bank by bank by the resolution authority. The Swiss gone-concern requirement is laid down in the ordinance with a fixed calibration.

The European experience also shows the limits of any resolution regime. The first major resolution under the Single Resolution Mechanism was that of Banco Popular Español in June 2017, when the Single Resolution Board ordered the sale of the bank to Banco Santander for one euro. Critics noted, however, that the Board had been unprepared in its first years and that information flows between the European Central Bank and the Board had been inadequate.² Other failing banks in the euro area were handled under national insolvency procedures with state support, which led to criticism that the European framework was applied selectively. The Swiss decision of 2023 to prefer a merger thus had precedents in Europe as well.³

The United Kingdom: the Banking Act 2009, ring-fencing and resolvability assessment

The United Kingdom introduced a special resolution regime for banks through the Banking Act 2009, later adding the bail-in tool in line with the European directive.⁴ The Bank of England, as the resolution authority, prefers bail-in for the largest banks and has developed a Resolvability Assessment Framework, published with the Prudential Regulation Authority in July 2019. The framework requires firms to show that they have adequate financial resources for resolution and can maintain operational continuity in resolution. They must also show that their governance and preparation are sufficient to support the execution of a resolution. The first assessments of eight major UK banks were completed in June 2022, when the firms published their own disclosures at the same time as the Bank of England. A second round followed in August 2024.⁵

The United Kingdom also adopted a structural measure that Switzerland had rejected in 2010 and 2011: the ring-fencing of retail banking. Since 1 January 2019, banks with more than a threshold amount of core retail and small business deposits and material investment banking activities must hold their core retail services in a separate ring-fenced entity. The threshold, originally GBP 25 billion, now stands at GBP 35 billion, and about GBP 1.2 trillion of core deposits were placed in ring-fenced banks during the transition.⁶ The Swiss emergency plan and the British ring fence pursue a similar objective: the protection of domestic retail banking from losses elsewhere in the group. The British solution imposes the separation in advance and permanently. The Swiss solution relied on the bank’s plan to effect the separation when needed, supported by the voluntary creation of Swiss subsidiaries. In the Credit Suisse case the Swiss subsidiary existed and the emergency plan had been approved. The authorities nevertheless treated bankruptcy combined with the emergency plan as the last resort among their three options, as section IX has shown.

The Swiss peculiarities

The comparison shows that the Swiss regime was never unusual in its instruments. Its peculiarity lay in the ratio between the size of the banks and the size of the home economy. The FSB noted in 2024 that the merged UBS had a leverage ratio exposure of about 200 per cent of Swiss GDP, the largest of any G-SIB in relation to its home jurisdiction.⁷ The SNB gave a figure of about 179 per cent for the end of 2023.⁸ Neither the European Union nor the United Kingdom faces a comparable concentration. The euro area can share the cost of a bank failure across twenty economies. The largest British banks, although big, do not reach the same proportion to UK output. The Swiss regime must therefore do more with fewer resources, which explains both the Swiss finish of 2011 and the stricter requirements proposed since 2024.

Notes

1. European Commission, press release “Single Resolution Mechanism to come into effect for the Banking Union”, IP/15/6397, 31 December 2015, https://ec.europa.eu/commission/presscorner/detail/en/ip_15_6397. ↩
2. Peterson Institute for International Economics, “Mixed Reviews for the Single Resolution Board”, Realtime Economic Issues Watch, https://www.piie.com/blogs/realtime-economic-issues-watch/mixed-reviews-single-resolution-board. The post discusses a report of the European Court of Auditors on the Board’s early years. ↩
3. ECB Banking Supervision, press release of 23 June 2017 on Veneto Banca and Banca Popolare di Vicenza, https://www.bankingsupervision.europa.eu/press/pr/date/2017/html/ssm.pr170623.en.html: the ECB declared both banks failing or likely to fail, the Single Resolution Board concluded that resolution action was not warranted, and the banks were wound up under Italian insolvency law, with parts of their business sold to Intesa Sanpaolo under a state aid approval of the European Commission. ↩
4. Banking Act 2009 (c. 1), Part 1 (“Special Resolution Regime”), https://www.legislation.gov.uk/ukpga/2009/1/part/1, whose section 1(3) now lists the bail-in option among the stabilisation options; the bail-in stabilisation option was inserted by section 17 of the Financial Services (Banking Reform) Act 2013, https://www.legislation.gov.uk/ukpga/2013/33/section/17. ↩
5. Bank of England, “Resolvability Assessment Framework”, https://www.bankofengland.co.uk/financial-stability/resolution/resolvability-assessment-framework. ↩
6. Bank of England, “Ring-fencing”, https://www.bankofengland.co.uk/prudential-regulation/key-initiatives/ring-fencing. ↩
7. FSB, Peer Review of Switzerland (as above), p. 3. ↩
8. SNB, Financial Stability Report 2024 (as above), p. 22. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.