The financial crisis showed, however, that wobbling banks can lead to stumbling sovereigns. To cut this direction of the nexus, financial market regulation was already improved substantially. In the euro area, a common restructuring and resolution regime (the Single Resolution Mechanism) and a bank supervision body under the aegis of the ECB (the Single Supervisory Mechanism, SSM) were established.
The Single Resolution Mechanism and the Bank Recovery and Resolution Directive (BRRD), which assure the harmonised implementation of the rules throughout all member states, substantially strengthen the principle of individual responsibility in the banking sector, thereby reducing the likelihood of public bail-outs.