Eurozone may use SRM borrowing to prevent shocks

The eurozone’s Single Resolution Mechanism could use its borrowing ability to cushion shocks to countries whose financial systems are roiled by major bank failures, Dutch finance minister Jeroen Dijsselbloem said.

The EU last week agreed to create a new agency to handle eurozone bank failures. The compromise needs approval by the European Parliament and by national governments to become law.

As part of the SRM deal, an industry-financed Single Resolution Fund will be created to cover the cost of saving or shuttering lenders. During the fund’s start-up period, its resources will be segregated in national compartments.