Specifically, before the ECB takes over its tasks as single supervisor, it will undertake a rigorous balance sheet assessment of the banks it will directly supervise, including an asset quality review. The assessment will be undertaken together with national supervisory agencies and, as needed, with external consultants. In case it reveals capital shortfalls, it is the responsibility of the banks to raise capital themselves.
As acknowledged by the European Council, public backstops will ensure that any remaining shortfalls are filled. Such backstops can be provided at national or, as last resort, at euro area level. Regarding the SRM, the legal framework for resolution contained in the Bank Recovery and Resolution Directive (BRRD) creates a stronger set of tools for winding down failing banks in the future.