A comparative and conceptual evaluation of the European Central Bank and the Central Bank of Republic of Turkey in the European banking system context

The banking union gets a directive in the form of the Bank Recovery and Resolution Directive, which contains three pillars that will be used to deal with ailing commercial banks in the euro area. The Single European Banking Authority extends the powers of the European Central Bank to receive reports from international banks regarding their activities as well as their liquidity. The Single European Bank Resolution Mechanism, on the other hand, regulates the conditional resolution of ailing banks, whereby shareholders in particular are held liable through a liability cascade with the so-called bail-in principle. In addition, a €55 billion fund will be set up by 2024 for the resolution, which will take effect at the end of the cascade before state institutions. The harmonised deposit guarantee scheme, which has not yet been implemented, represents a far-reaching protection mechanism for small investors who will be compensated in the event of bank failure. This paper shows that the Banking Union, alongside the European Stability Mechanism, has an effective protective function with regard to financial crises in the banking sector. Keywords: Bank recovery, Resolution directive, European banking system, European stability mechanism