Proposal for a Single Resolution Mechanism: a major step towards completing the banking union
21 Mar 2014 04:11 PM
European Parliament and Council back
Commission's proposal for a Single Resolution Mechanism: a major step
towards completing the banking union.
President of the European Commission, José Manuel Barroso said:
Today's political agreement on the single resolution mechanism completes
our banking union. This will strengthen confidence and stability in the
financial markets and help restore lending to the economy. We promised to do
this before the European Parliament elections. I'm delighted we have
delivered.
Internal Market and Services Commissioner Michel
Barnier said: “Today's compromise allows us to complete the
architecture of the banking union for the eurozone. This would not have been
possible without the assiduous work and spirit of compromise demonstrated by
both co-legislators.
It represents a major step towards the alignment
of both banking supervision and banking resolution at a central level, whilst
involving all relevant national players. Backed by an appropriate resolution
funding arrangement, and an acceptable decision-making process, this second
pillar of the banking union will allow bank crises to be managed more
effectively. In case of cross-border failures, it will be much more efficient
than a network of national resolution authorities and will help to avoid risks
of contagion. The Single Resolution Mechanism might not be a perfect
construction but it will allow for the timely and effective resolution of a
cross border bank in the eurozone thus meeting its principal objective.
Together with the reforms to the financial sector
for all 28 countries, the completed banking union will put an end to the era of
massive bailouts. It will further contribute to the return to financial
stability thus creating the right conditions for the financial sector to once
again lend to the real economy which is essential to consolidate the economic
recovery and to create jobs.
This political agreement is just in time to allow
the current European Parliament to confirm the trilogue agreement in
April's final plenary session. I would like to thank all those involved in
the negotiations, in particular the rapporteur Elisa Ferreira and the shadow
rapporteurs - Corien Wortmann-Kool, Sylvie Goulard, Sven Giegold, Philippe
Lamberts, Vicky Ford, Thomas Händel - and Sharon Bowles, Chair of the ECON
Committee; the Council, the Greek and Lithuanian Presidencies, especially Greek
Minister for Finance Yannis Stournaras, and Eurogroup President,
Jeroen Dijsselbloem, for this major achievement.
Thanks to the strong sense of responsibility
demonstrated today, Europe is living up to its commitments."
Background
The European Parliament and the Council have
reached a provisional agreement on the proposed Single Resolution Mechanism
(SRM) for the Banking Union (IP/13/674
). The mechanism complements the Single Supervisory Mechanism (SSM) (IP/12/953) which,
once fully operational in late 2014, will see the European Central Bank (ECB)
directly supervise banks in the euro area and in other Member States which
decide to join the Banking Union. The Single Resolution Mechanism would ensure
that – not withstanding stronger supervision - if a bank faced serious
difficulties, its resolution could be managed efficiently with minimal costs to
taxpayers and the real economy.
The Single Resolution Mechanism will be governed
by two texts: an SRM regulation covering the main aspects of the mechanism and
an intergovernmental agreement related to some specific aspects of the Single
Resolution Fund (SRF).
Key elements of the trilogue agreement:
The SRM Regulation builds on the Rulebook on bank
resolution set out in the Bank Recovery and Resolution Directive (BRRD, see IP/12/570
) and establishes the following:
Scope: The SRM would apply to all banks
supervised by the SSM. The Board would prepare resolution plans and directly
resolve all banks directly supervised by the ECB and for cross-border banks.
National resolution authorities would prepare resolution plans and resolve
banks which only operate nationally and are not subject to full ECB direct
supervision, provided that this would not involve any use of the Single Fund.
Member States could opt to have the Board directly responsible for all their
banks. The Board would decide in any case for all banks, including those that
operate nationally and are not subject to full ECB direct supervision, if
resolution involved the use of the Fund.
Decision-making: Centralised decision-making
would be built around a strong Single Resolution Board (the 'Board')
and would involve permanent members as well as the Commission, the Council, the
ECB and the national resolution authorities. In most cases, the ECB would
notify that a bank is failing to the Board, the Commission, and the relevant
national resolution authorities. The Board would then assess whether there is a
systemic threat and any private sector solution. If not, it would adopt a
resolution scheme including the relevant resolution tools and any use of the
Fund. The Commission, is responsible for assessing the discretionary aspects of
the Board's decision and endorsing or objecting to the resolution scheme.
The Commission's decision is subject to approval or objection by the
Council (silence procedure) only when the amount of resources drawn from the
Single Fund is modified or if there is no public interest in resolving the
bank. Where the Council or the Commission object to the resolution scheme, the
Board would have to amend the resolution scheme. The resolution scheme would
then be implemented by the national resolution authorities. If resolution
entails State aid, the Commission would have to approve the aid prior to the
adoption by the Board of the resolution scheme.
Governance of the Board / voting modalities: In
its plenary session, the Board in its plenary session would take all decisions
of a general nature and the individual resolution decisions which involve the
use of the Single Resolution Fund above €5 billion. In its executive
session, the Board would take decisions in respect of individual entities or
banking groups where the use of the Single Resolution Fund remained below this
threshold. The composition of the executive session of the Board would include
the Chair, the Executive Director, three other permanent members, while the
Commission and the ECB would be permanent observers. In addition, to ensure
that the interests of all Member States on which the resolution had an impact
were considered, further members would be part of that session according to the
institution that was being resolved. None of the participants in the
deliberation would have a veto.
Fund: A Single Resolution Fund would be
constituted to which all the banks in the participating Member States would
contribute. The Fund has a target level of €55 billion and can borrow from
the markets if decided by the Board in its Plenary Session. The Fund would be
owned and administrated by the Board. The Single Fund would reach a target
level of at least 1% of covered deposits over a 8 year period. During this
transitional period, the Single Fund, established by the SRM Regulation, would
comprise national compartments corresponding to each participating Member
State. The resources accumulated in those compartments would be progressively
mutualised over a period of 8 years, starting with 40% of these resources in
the first year. The establishment of the Single Fund and its national
compartments and the decision-making on its use would be regulated by the
Regulation, while the transfer of national funds towards the Single Fund and
the activation of the mutualisation of the national compartments would be
provided for in an inter-governmental agreement established among the
participating Member States in the SRM.
Next steps
In order to become law, the Commission's
proposal needs to be adopted jointly by the European Parliament and by the EU
Member States in the Council (which votes by qualified majority). It is
expected that the European Parliament will vote this legislation in plenary in
April, while the Council will formally adopt it subsequently.
The SRM would enter into force on 1 January 2015,
whereas bail-in and resolution functions would apply from 1 January 2016, as
specified under the Bank Recovery and Resolution Directive.
More information:
http://ec.eur
opa.eu/internal_market/finances/banking-union/
http://europa.eu/r
apid/press-release_MEMO-14-57_en.htm
Contacts :
Chantal Hughes (+32 2 296 44
50)
Audrey Augier (+32 2 297 16 07)
Carmel
Dunne (+32 2 299 88 94)
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