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06-06-2012

Bank crisis management directive

Following the publication today by the European Commission of the bank crisis management directive, Sharon Bowles (ALDE, UK), who chairs the European Parliament's Economic and Monetary Affairs Committee, and Gunnar Hökmark (EPP, SE), designate rapporteur for the legislation made the following statements.  Parliament has requested such legislation since 2010.

Ms. Bowles welcomed the long overdue proposals, but feared current events may take over.
Mr Hökmark said he would focus on making a law that would spare taxpayers from footing the bills when banks ran into trouble.

Ms. Bowles welcomed the long overdue proposals, but feared current events may take over. She said:

"In both comedy and tragedy, timing is everything. The bulk of the crisis resolution is long overdue, the bail-in proposals playing to a grim reception.

The Parliament called for crisis management and resolution as part of the European Financial Supervisory Architecture over two years ago, notably through the 'Ferreira resolution' of July 2010.

The proposal we have today may be only useful for the future but it does not solve the current problems we face, and frankly should not be held as such.  In the long term I have no doubt that we will want to build an effective and strong crisis resolution scheme within a pan-European framework.  The massive capital interventions of these days need to look to a European or Eurozone level for both assessment and funding.

In the short term we need further measures, such as forcing banks to develop living wills and involving the European Banking Authority better. Parliament wants to embed such requirements in the capital requirements legislation on the table (CRD IV). We cannot wait an extra two and a half years for the crisis management legislation to be negotiated and implemented - its implementation date is January 2015!

Meanwhile it could also be clarified that the collective deposit guarantee schemes over the EU act as reinsurance for any Member State scheme. Over time these could be treated as loans, but collectively they are large enough to prevent runs from insured depositors and also protect the Single Market of branches and subsidiaries."


Mr Hökmark said he would focus on making a law that would spare taxpayers from footing the bills when banks ran into trouble.  He said:

"Shareholders rather than tax payers must be the ones to shoulder responsibility as well as bear the costs of banking crises. That will be a guiding principle in my work on the Commission proposal.

A transparent and predictable framework is also going to be an important issue to me. Predictable rules of the game are a fundamental precondition for stable financial markets.

Bank failures are exacerbating the economic crisis currently hitting a number of EU Member States. A framework which clearly outlines how such failing banks will be dealt with constitutes an important part of the solution to the ongoing economic crisis."

Press release on adoption of EP 2010 resolution:EP resolution calling for bank crisis management legislation and making recommendations (July 2010)