Germany openly seeks more advantages for its banks

General view of the meeting room of the Ecofin Council, regrouping the 27 EU ministers of Finance, (EC Audiovisual Services, 14/5/2013).

General view of the meeting room of the Ecofin Council, regrouping the 27 EU ministers of Finance, (EC Audiovisual Services, 14/5/2013).

The Commission proposal for a Bank Resolution and Recovery Directive divided deeply the Ecofin council in its yesterday’s Brussels meeting. Again the division took the form of North versus South or rather Germany & Co against everybody else. Mr Wolfgang Schauble, the German Federal Minister for Finance, insisted that the line of funds to be used by national resolution authorities in bail-in operations in case of a bank failure should contain also the unsecured deposits. France, Spain and Luxembourg maintained that unsecured deposits should be given a clear preference in relation to other bank creditors.

Apart from that even the issue of the theoretically secure deposits of up to €100,000 was not unanimously agreed. In both cases Germany wanted to degrade as much as possible the creditworthiness of all Eurozone banks, in order to underline the fame of its own lenders as the most creditworthy, despite the fact that the Deutsche Bank recently lied by saying it won’t be needing more capital from its shareholders. Let’s take one issue at a time.

The bank resolution directive

According to the Commission the proposed directive is aimed at providing national authorities with common powers and instruments to pre-empt bank crises and to resolve any financial institution in an orderly manner in the event of failure, whilst preserving essential bank operations and minimising taxpayers’ exposure to losses. It establishes a range of instruments to tackle potential bank crises at three stages: preparatory and preventative, early intervention, and resolution.

In view of that yesterday the Ecofin council discussed exactly this framework for the recovery and resolution of credit institutions and investment firms, focusing in particular on the design of the bail-in instrument. This tool will guide the national authorities over the line of funds to be used in the event of a resolution of a failing or about to fail bank. The two Cypriot banks were a test of this procedure. However in the Nicosia case the solution agreed by the Eurogroup and the Cypriot authorities was entirely provisional exactly because this proposed directive is still not in force.

In any case what is now at stake is the line of funds to be used in resolving or rescuing a failing bank. The only point that yesterday’s Ecofin council agreed was that shareholder funds will be used first. From that point onwards, that is the rest of funds to be used in a bail-in procedure, everything remained in the air. The reason for the disagreement was that Germany wants to use this affair, to boost the largely fictitious strong creditworthiness of its national lenders and more so of Deutsche Bank.

It goes without saying that France cannot accept that, expressing also the interests mainly of the Italian, Spanish and Luxemburg’s banks. The key point is the fate of the unsecured deposits above the €100,000 benchmark. If those deposits are to be placed entirely at the discretion of the bail-in authorities and not be given any preference, the slightest difference in the public and market perception about which banks are more secure than others, may create a major comparative advantage for some. If rightly exploited, this advantage can create two major categories of Eurozone banks, the secure and the less secure ones. The latter will be forced to pay more dearly for their funds and seemingly Germany & Co hopes to monopolise the former category.

According to the official Press release issued by the Council after the Ecofin was concluded its Presidency noted that there was:
* agreement amongst most member states that deposits under €100,000 must be fully guaranteed;
* considerable support for depositor preference (i.e. last category of assets to be bailed in), with some reservations raised on giving preference to large corporate deposits.

What Germany wanted

In both cases Germany wanted the Directive to contain the least possible reassurances to bank account holders, so as its own banks and more so the Deutsche Bank emerge as the most secure of them all. As a result Berlin is reserved over a full and unquestionable reassurance to be included in the Directive that all deposits of up to €100,000 are completely safe and their owners will be fully paid in the event of the bank’s resolution. Sources from the Ecofin council say that Germany contested also the preference to be given to holders of deposit accounts above the limit of €100,000.

Germany maintains that all account holders be given the least possible coverage by the directive.
Berlin follows now exactly the same policy line that Germany held in the case of the recent resolution and recovery of the two Cypriot banks. In this case the Eurogroup, under strong German pressures echoed and blindly followed by its Berlin loving president, Jeroen Dijsselbloem, had initially accepted that a haircut could be given even to deposits under the €100,000 benchmark. Then Berlin was at roof tops about the deepest possible haircut to be given to Cypriot deposits of above €100,000. At that time Paris was short-sighted in supporting Berlin destroy the Cypriot banking system. Yesterday however the French minister of Finance, Pierre Moscovici, was obliged to explain his change of position regarding both, the haircut of deposits under €100,000 and the preference to be given or not to larger deposits.

There is no doubt that Germany wants the Bank Resolution and Recovery Directive to contain the least possible reassurances to all bank account holders, so as its own national lenders and the Deutsche Bank gain a comparative advantage.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

More than half of the global population is now online

Protests, violence in Haiti prompts international call for ‘realistic and lasting solutions’ to crisis

New rules to help consumers join forces to seek compensation

MEPs urge EU states to ensure better care of transported animals

5G and the growing need for national CTOs

FROM THE FIELD: New sensors protect vulnerable Malawians against deadly lightning

4 steps to developing responsible AI

Australian solar could power Singapore within a decade

9 ways to strengthen the global economic response to COVID-19

How cocoa farming can help stop deforestation

Northern Ireland: Parliament wants to secure post-Brexit regional funding

Why collective action is the key to saving our forests

5 ocean success stories to chase away the blues

What if nature became a legal person?

Niger population’s suffering ‘increasing with each passing month’: UN Refugee Agency

A Sting Exclusive: “Stronger Cybersecurity for a safer EU against cybercrime and cyber threats”, by MEP Dalli

Glasgow and Edinburgh race to become the UK’s first net-zero emissions city

FROM THE FIELD: Rohingya babies conceived out of ‘incomprehensible brutality’

We can solve climate change – if we involve women

Free movement of services: Commission takes further action to ensure a well-functioning Single Market for professionals

Syrian civilians must be protected amid ISIL executions and airstrikes: Bachelet

Commission presents far-reaching anti-tax evasion measures

Galileo funding: A ‘small’ difference of €700 million

Keeping cool in the face of climate change

5 ways to be a better humanitarian

We need to talk about big data and genomics. Here’s why – and how

How to keep essential value chains moving during the COVID-19 crisis

Colombia: ‘Terrible trend’ of rights defenders killed, harassed; UN calls for ‘significant effort’ to tackle impunity

The 13th round of TTIP negotiations hits a wall of intense protests and growing concerns

Reflections on the the biggest refugee crisis since World War II

Emergency coronavirus research: Commission selects 18th project to develop rapid diagnostics

Syria: Civilians bear brunt of unilateral sanctions, exacerbating ‘unparalleled suffering, destruction,’ says UN expert

Forget retail therapy – this is the age of the conscious consumer

DiscoverEU: 15,000 travel passes up for grabs to explore the EU this summer

Managing mental health during coronavirus – experts around the world share insights

Get off the path of deadly emissions, UN chief Guterres to urge in key climate change speech

Vienna has the world’s best quality of living

Latvian economy is thriving, but boosting productivity, improving social protection and transitioning to a low-carbon productive model are vital for sustainable and inclusive growth

Peacekeeping chief honours Tanzanian troops in Zanzibar, a year on from deadly DR Congo attacks

A Sting Exclusive: “Junior Enterprises themselves carry out projects focusing on the environment”, JADE President Daniela Runchi highlights from Brussels

The EU Commission lets money market funds continue the unholy game of banks

Mental health in times of a pandemic: what can each individual do to lessen the burden?

Companies have a new skill to master – innovation

How privacy tech is redefining the data economy

The 100-year climate catastrophe of Mont Blanc

Investing in health workers yields ‘triple dividend’, WHO chief says in New Year’s message

COP21 Breaking News_12 December: The New Draft Agreement!

UN chief calls for ‘solidarity, compassion and action’ on World Refugee Day

EU finally agreed to cut roaming charges in 2017 but criticism is always there

Statement by President Tajani on US steel and aluminium duties

IMF: The near-term outlook for the U.S. economy is one of strong growth and job creation

Asia-Pacific showing ‘decisive leadership’ on road to 2030 Sustainable Development Goals, deputy UN chief tells key forum

EU-Turkey leaders’ meeting, 9 March 2020

Abandoned mines could become the farms of the future

The representatives of the regions and the cities know better what the EU needs on migration, trade, poverty and taxation

Palestine refugee crisis ‘expanding’; leaving highest number at risk this century across Gaza

The future looks bright for solar energy

EU’s judicial cooperation arm, Eurojust, to become more effective with new rules

Everything you need to know about the coronavirus

Security Council urges countries to factor child protection into conflict prevention efforts

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s