Bending and Breaking Europe's Single Resolution Mechanism: the case of Italy

This paper examines the political economy and law of bank resolution in the case of Italy—specifically its treatment of three failing banks that were resolved in 2016/2017—Monte de Paschi, Veneto and Vicenza banks. These three cases stand out for the relatively large degree of discretion exercised by national resolution and state aid authorities, ultimately with the permission of their European counterparts. This paper examines the motivations driving Italian authorities to lobby 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.