Last Resort Lending to Solvent Credit Institutions in the Euro Area Before and after the Establishment of the Single Supervisory Mechanism (SSM)

Upon the launch of the European Economic and Monetary Union (the ‘EMU') on 1 January 1999, a debate opened as to which central bank would operate as lender of last resort to solvent credit institutions in the euro area: the European Central Bank (the ‘ECB'), or the national central banks (the ‘NCBs') which are members of the Eurosystem. This dilemma was solved with the entry into operation of the Emergency Liquidity Assistance mechanism, according to which the NCBs were entrusted with last resort lending, unless the ECB Governing Council found that this would interfere with the objectives and tasks of the European System of Central Banks. In relevant Communications issued in 2013 and 2014, the ECB published the procedural rules governing this mechanism.Under the catalytic impact of the establishment and entry into operation, as from 4 November 2014, of the Single Supervisory Mechanism (the ‘SSM') in the euro area, this paper explores whether it is advisable and legally feasible for the ECB to become the lender of last resort for the (solvent) credit institutions directly supervised by the ECB within the ESM