Bending and Breaking the Single Resolution Mechanism: The Case of Italy

Abstract

This article examines the political economy and law of bank resolution in the case of Italy – specifically, its treatment of three failing banks – the Monte dei Paschi, Veneto and Vicenza banks – which were resolved in 2016–17. These three cases stand out for the relatively large degree of discretion exercised by the national resolution and state aid authorities, ultimately with the permission of their European counterparts. This article examines the motivations of Italian authorities in lobbying the Commission for leeway in applying the bank recovery and resolution directive and analyses the intricacies of the legal framework to underline the extent of discretion exercised by policy-makers. It concludes that the discretion visible in these three cases is not (entirely) contained within EU law, and that bending the law or turning a blind eye to infractions was key to understanding the EU approach to Italy.