At last a solid base for the European Banking Union

Ecofin Council. Pierre Moscovici, French Minister of Finance, Wolfgang Schauble, German Federal Minister for Finance (from left to right). (Council of the European Union photographic library, 21/6/2013).

Ecofin Council. Pierre Moscovici, French Minister of Finance (standing), Wolfgang Schauble, German Federal Minister for Finance (from left to right). (Council of the European Union photographic library, 21/6/2013).

The Ecofin Council, regrouping the 27 EU ministers of Finance, struck an agreement at 2.00 o’clock this morning over the much debated ‘bank resolution and recovery’ draft directive. As it usually happens in the European Union the final agreement between member states on crucial issues does not go all the way through, but still offers the basic tools to establish a viable and working solution. This time the text agreed doesn’t provide for a strong, central bank resolution authority nor does it contain a bank resolution fund like the European Stability Fund. ESM’s involvement is limited to bank recapitalisation even retroactively, but not in bank resolution. In any case this was a breakthrough agreement that leads to more not less Union. Let’s see the details. Resolution authorities The compromise sets concrete rules for the national resolution authorities. It determines the main resolution measures, the bail-in tools/funds, the liabilities permanently excluded from bail-in like deposits under €100,000 and asks member states, as a general rule, to set up ex-ante resolution funds, to ensure that the resolution tools can be applied effectively. It also provides for national resolution authorities to set minimum requirements for own funds and eligible liabilities (minimum requirements for eligible liabilities – MREL) for each institution. The agreement was concluded only hours before the 27 EU leaders start converging to Brussels for their June Summit at 18.30 h this afternoon. Understandably they are supposed to endorse the Ecofin agreement without changes. Based on article 114 of the European Treaty, the directive requires a qualified majority for adoption by the Council, in agreement with the Parliament. The Ecofin Council called on the Presidency to immediately start negotiations with the legislators with the aim of adopting the directive at first reading before the end of the year. Given that the present Parliament will be resolved in June 2014 in view of the European elections, the directive must be approved the soonest possible so as the Banking Union is enacted before the end of 2014. The two camps The Ecofin Council was divided in two camps. On the one side it was Britain, Sweden, Denmark and France asking for more flexibility. On the other side Germany, Holland and Finland demanded stricter rules so as the bank resolution procedure would offer more reassurances to investors and depositors by setting strict procedures. The final outcome is in between those two positions. The most important points of the agreement are the following: *It will be the national resolution authorities to do the job on the spot. *Banks would be required to draw up recovery plans, and update them annually. *National authorities would have the power to appoint special managers to an institution and even sale all or part of the business. *Deposits of less than €100,000 would be inalienable and covered. *Deposits of physical persons and micro, small and medium enterprises would have preference over the claims of ordinary unsecured, non-preferred creditors and depositors from large corporations. * The bail-in tool would enable resolution authorities to write down or convert into equity the claims of the shareholders and creditors. * Exclusions from bail-in are as follows: covered deposits, secured liabilities including covered bonds, liabilities to employees of failing institutions such as fixed salary and pension benefits, commercial claims relating to goods and services critical for the daily functioning of the institution, liabilities arising from a participation in payment systems which have a remaining maturity of less than seven days, inter-bank liabilities with an original maturity of less than seven days Deposit guarantee scheme There is however a loophole in the exclusion of small depositors from bail in. The Ecofin decision states: “The deposit guarantee scheme (DGS), which would always step in for covered deposits (i.e. deposits below €100,000), would have a higher ranking than eligible deposits”. This means that the DGSs would step in and contribute in the bail-in cost, if the unsecured deposits’ contribution is exhausted. This is an indirect contribution of small depositors to the bail-in cost. However DGSs are given a higher pecking ranking than unsecured deposits. In total the draft directives, one for the direct retroactive recapitalization of banks by the ESM which was agreed last week, and now the agreement on the bank resolution and recovery mechanism, plus the already adopted text of a directive on bank supervision by the European Central Bank create a solid environment for the enactment of the European Banking Union. All those developments will adequately and effectively repair the holes in the European Economic and Monetary Union, thus solidifying the base for the single euro money.

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe to get the latest posts sent to your email.

Interesting reads

© WFP/Arete/Ali Yunes Some residents of Beirut who have been displaced by the conflict are now living on the streets of the Lebanese capital.

‘Perfect storm’: Lebanon crisis deepens as civilians bear the brunt

This article is published in association with United Nations. Lebanon is facing a “perfect storm of unpredictable challenges” as conflict, mass displacement and dwindling humanitarian resources converge, the UN’s Resident and Humanitarian Coordinator in Lebanon, Imran Riza, has warned. The current escalation began on 2 March, when outgoing fire by Hezbollah drew a strong retaliation from […]
© WFP/Maxime Le Lijour People living in Gaza have received humanitarian aid from the UN throughout the conflict with Israel.

UN relief chief condemns ‘$1 billion-a-day’ cost of war in Middle East

This article is published in association with United Nations. The UN’s emergency relief chief on Wednesday condemned the “$1 billion-a-day” cost of the war in the Middle East, at a time when humanitarian needs are soaring and aid funding is falling dangerously short. “We’re seeing the consequences spread faster than we can respond”, warned the UN emergency […]
© UNICEF/Azizullah Karimi Afghan returnees from Iran gather at the Islam-Border, near Herat in western Afghanistan (file).

‘Toxic rain’ warning from oil depot strikes amid ongoing Middle East war

This article is published in association with United Nations. Toxic “black rain” linked to strikes on oil depots, mass displacement and continuing disruption to aid supply chains are upending lives across the Middle East and beyond after 10 days of war in the region, UN humanitarians said on Tuesday.  Speaking to reporters in Geneva, UN Human […]
© UNHCR People gather at the Masnaa border point in Lebanon as they wait to cross into Syria.

Nearly 700,000 displaced in Lebanon as Middle East crisis escalates

This article is published in association with United Nations. On day 10 of the war engulfing the Middle East, UN agencies on Monday reported massive displacement across the region, along with surging food and fuel prices that risk increasing hunger and suffering for the most vulnerable. In Lebanon alone, nearly 700,000 people including around 200,000 children […]
UN Photo/Pasqual Gorriz Smoke rises in Beirut, Lebanon, following the outbreak of hostilities across the Middle East.

Lebanon ‘dragged back into turmoil’, UN envoy warns

This article is published in association with United Nations. Lebanon has been “dragged back into a state of turmoil and violence”, the UN’s top envoy in the country warned on Saturday, after the latest round of regional strikes triggered a fast‑escalating crisis along the Blue Line. What had been fragile but real momentum, she said, has […]
UNHCR Smoke rises after an airstrike in Beirut, Lebanon.

MIDDLE EAST LIVE: Strikes continue across Middle East as humanitarian concerns grow

This article is published in association with United Nations. Highlights Production team: Vibhu Mishra with Daniel Johnson in GenevaToday 12:15 μ.μ. UN rights office warns displacement orders in Lebanon affecting hundreds of thousands The UN human rights office has warned that large-scale displacement orders and ongoing airstrikes in Lebanon are worsening the suffering of civilians already affected […]
© UNICEF/Ramzi Haidar Destroyed buildings and debris in the southern suburbs of Beirut, Lebanon, following airstrikes.

MIDDLE EAST LIVE: Further escalation drives uncertainty and suffering

This article is published in association with United Nations. On day six of the war in the Middle East, there’s been no let-up in bombs, drones and rockets targeting Iran, Israel, Lebanon and many Gulf States, while NATO forces reportedly intercepted a missile fired at Türkiye by Iran, a claim denied by Tehran. We’ll bring you […]
UN Photo/Pasqual Gorriz Smoke rises in Beirut, Lebanon, following the outbreak of hostilities across the Middle East.

MIDDLE EAST LIVE: Conflict continues across region amid US, Israeli and Iranian strikes

This article is published in association with United Nations. Violence in the Middle East is continuing into a fifth day, with US and Israeli strikes against Iran and Iranian missile and drone attacks reported across several countries in the region. The escalating confrontation is disrupting airspace, transport and daily life while raising fears of a wider […]
© IAEA/Paolo Contri The Bushehr Nuclear Power Plant in Iran.

Iran crisis: Schoolgirls killed, thousands displaced and aid compromised

This article is published in association with United Nations. On the fourth day of Israeli and United States airstrikes against Iran and amid growing violence and instability in the Middle East, the UN urgently called for protection of civilians and warned of growing displacement and humanitarian needs. UN human rights office spokesperson Ravina Shamdasani also recalled […]
© Unsplash/Kamran Gholami Tehran, the capital of Iran. (file photo)

MIDDLE EAST LIVE: Strikes continue from US, Israel and Iran as UN urges restraint

This article is published in association with United Nations. Violent escalation in the Middle East has entered a third day as coordinated US and Israeli strikes against Iran aimed at regime change continue to cause loss of life and damage across the region, prompting Iranian missile and drone counter-strikes hitting targets in multiple countries. Explosions, airspace […]
Iran attacks

Deadly bombing of Iran primary school ‘a grave violation of humanitarian law’: UNESCO

This article is published in association with United Nations. The UN education agency, UNESCO, says that the bombing of a primary school during the US and Israeli military attacks on Iran on Saturday constitutes a grave violation of humanitarian law. The missiles reportedly destroyed a girl’s primary school in Minab, southern Iran, killing around 150 and […]
© UNRCO Iran Tehran, the capital of Iran.

Attacks on Iran and retaliatory strikes ‘undermine international peace and security’

This article is published in association with United Nations. UN Secretary-General António Guterres and the heads of UN agencies have condemned Saturday’s joint Israeli and US attacks on Iran and the Iranian retaliatory strikes on Israel and the Gulf Regions. The attack on Iran reportedly targeted military sites as well as the leadership of the Iranian […]
© WFP/Maxime Le Lijour A woman holds a child as a storm approaches Khan Younis in Gaza.

Palestine: UN rights chief highlights suffering, atrocity crimes ‘that remain unpunished

This article is published in association with United Nations. The UN rights chief Volker Türk on Thursday highlighted the “human-made disaster” across the Occupied Palestinian Territory stemming from Israel’s disregard for human rights norms and serious violations also committed by Hamas and other Palestinian armed groups. Citing a new report from his office (OHCHR) covering the […]
Ángela Soria Pitarch was born on March 28, 2003. She is currently a fifth-year medical student at the University of Valencia.

Not the Future, the Present: Young Voices Shaping Global Health in 2026

This article was exclusively written for The European Sting by Ms. Ángela Soria Pitarch was born on March 28, 2003. She is currently a fifth-year medical student at the University of Valencia. She is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to […]
© UNOCHA Many rural areas of Ukraine have been blasted by shelling and drone strikes. The country is also one of the most mined in the world, top UN aid officials warn.

Ukraine wakes to more violence as Russia’s invasion enters fifth year

This article is published in association with United Nations. The full-scale invasion of Ukraine by Russian troops on 24 February 2022 shattered the peaceful aspirations of an entire continent, but war must never be the new normal, UN General Assembly President Annalena Baerbock said on Tuesday. “Four years ago, people in Europe woke up in another […]
Fokah Wembe Darrell Dupray is a 4th-year medical student at Université des Montagnes, Bangangté Cameroon and a student leader within the Cameroon Medical Students’ Association (CAMSA).

From Local Barriers to Global Lessons: Practical Paths Toward Inclusive Healthcare

This article was exclusively written for The European Sting by Ms. Zainatun Nawwariyah is a fifth-year medical student at the Faculty of Medicine, University of North Sumatera, who is passionate about advancing medicine through research, advocacy, and service. She is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed […]
© UNICEF/Bullen Chol A grandmother takes care of her 17-month-old malnourished grandson in South Sudan.

World News in Brief: UN humanitarian chief visits South Sudan, shelter fire risks in Gaza, West Bank violence

This article is published in association with United Nations. The UN Emergency Relief Coordinator arrived in South Sudan on Friday to visit one of the most under-reported humanitarian crises in the world, as clashes between government and opposition forces continue in Jonglei state.  Tom Fletcher will focus on the deteriorating humanitarian situation in the world’s youngest country and escalating protection risks for both civilians and aid workers.  […]
Ukraine’s women at breaking point after four years of war as attacks on energy, healthcare continue – UN humanitarians

Ukraine’s women at breaking point after four years of war as attacks on energy, healthcare continue – UN humanitarians

This article is published in association with United Nations. Four years into Russia’s full-scale invasion, millions in Ukraine struggle to keep the lights on and heat their homes, with the crisis taking a particular toll on women, humanitarians warned on Friday. Freshly back from a visit to the country UN Women’s Chief of Humanitarian Action Sofia […]
Fears of ethnic cleansing in Gaza and the West Bank: UN rights report

Fears of ethnic cleansing in Gaza and the West Bank: UN rights report

This article is published in association with United Nations. Increased Israeli attacks and the forced transfer of Palestinians have sparked concern over ethnic cleansing in the Gaza Strip and the West Bank, the UN human rights office, OHCHR, said in a report issued on Thursday.  The report covers the period from 1 November 2024 to 31 October 2025 and is […]

Why don't you drop your comment here?

Go back up

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

The European Sting – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology – europeansting.com