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Parliament negotiators rescue seriously damaged bank resolution system

ECON Press release - Economic and monetary affairs20-03-2014 - 11:12
 

European Parliament negotiators on Thursday reached a deal with their member state counterparts on the single resolution mechanism to deal with failing banks. Many elements fell into place early in the morning after 16 hours of talks. The elements agreed will help to ensure that the system cannot become a hostage to political power games and can deliver swift and credible decisions.


The deal has now also won the seal of approval of Parliament’s political group leaders and will now be tabled for a vote at the second plenary session in April, the last of this legislature.


Elisa Ferreira (S&D, PT) who led the talks on Parliament’s behalf, said "I welcome the deal we have reached today and I can put it to the plenary with some satisfaction.  This deal has repaired many of the serious flaws in the initial Council position and I believe it is an improvement not only for the majority of MEPs but for many EU countries too.  The mechanism as agreed will, I believe, be able to deliver the key goals for which it was intended.  Certainly, this is not the end of the road and we must remain vigilant to ensure that the right implementing rules are laid down and that the fund’s borrowing capacity will be translated into practice as rapidly and effectively as it needs to be". 


The deal improves in the following ways on the finance ministers’ initial plans:


•             the ECB supervisor will trigger the whole process, being responsible for deciding whether a bank is on the brink of failing.  The Resolution Board may ask that the ECB takes such a decision and if the ECB declines to do so, then the Board itself may take the decision. The ECB is therefore the main “triggering” authority but the Board may also play a role if the ECB is reluctant or hesitates to act,


•             the Commission will adopt draft resolution schemes, action plans drawn up to address a specific case of a failing bank.  The Council will be involved only at the Commission’s express request. This will avoid pervasive political interference in individual resolution cases, a key concern for MEPs,


•             the time for decisions to be taken on the establishment of a resolution scheme was reduced.  Moreover, the decision-making process was greatly streamlined.  A resolution scheme could therefore be approved within a weekend, from the closing of the US markets to their opening in Asia.  This was also a key requirement for MEPs,


•             a system will be established, before the regulation enters into force, which will enable the bank-financed single resolution fund to borrow.  This will allow it to increase its firepower, an ability MEPs stressed would be particularly crucial in the first years when the fund would only have a small capitalisation, and


•             rapid mutualisation of the “national compartment” setup of the fund. 40% is to be mutualised in first year, 20% in second year, the rest equally over a further 6 years.  The national funds would pool 60% of all their resources by year two. Rapid mutualisation was a key issue MEPs wanted settled before the intergovernmental chapter could be given a green light.

REF. : 20140319IPR39310
 
 
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