Commission to decide on bank resolution issues

Michel Barnier, Member of the EC in charge of Internal Market and Services, delivered today a Press conference on an European Commission’s proposal for a Single Resolution Mechanism to deal with failing banks which will complement the Single Supervisory Mechanism (SSM)(EC Audiovisual services, 10/7/2013)

Michel Barnier, Member of the EC in charge of Internal Market and Services, delivered today a Press conference on an European Commission’s proposal for a Single Resolution Mechanism to deal with failing banks which will complement the Single Supervisory Mechanism (SSM)(EC Audiovisual services, 10/7/2013)

The European Commission, the European Central Bank and the International Monetary Fund are planning to challenge once more the supremacy of Germany in the Ecofin Council and bring back the issue of the single bank resolution authority. The clash over the character of this cornerstone building-block of the European Banking Union is some weeks old and what is at stake has to do with the properties of the resolution mechanism.

Germany insists on the need for decentralised and consequently loose resolution authorities based in the 17 Eurozone capitals, while the Commission, the ECB and the IMF propose a strong and central resolution authority based in Brussels. Germany hypocritically argues that the enactment of a strong, central resolution authority demands a change in the Treaties of the European Union, a procedure that may take years to accomplish.

In respect with this antithesis the Sting writer Maria Milouv wrote yesterday after Tuesday’s Ecofin Council: “This position for centrally managed bank resolutions was held also by the European Central Bank, the European Commission and Ollie Rehn personally. Unfortunately Germany insisted that resolutions should be left to national authorities. Berlin didn’t want a central resolution authority because in case of a big bank failure there might surface obligations which would have to be born centrally” and thus weigh also on the German taxpayer. On top of that Berlin fears that a powerful central resolution authority might decide at some point in the future to close down one of the many problematic regional German banks and ask the country’s taxpayers to pay for the cost.

Berlin won the first round in the June Ecofin council and managed to pass a text going like that: “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”.

This wording however does not necessarily exclude the creation of a single central resolution authority, for example in Brussels under the auspices of the Commission, with executive arms in national capitals or the participation of national authorities as minority representatives. This last option was chosen today by the Commission, and the the EU’s executive proposed to have the last word on almost everything, as reported below.

As things turned out today the EU Commission, without saying it, proposed itself to be nominated as the central bank resolution authority aided by the ECB and national representatives. This was clearly indicated even from yesterday by Rehn when he commented that “This week, the Commission will move to put in place the next building block of the banking union with our proposal for a Single Resolution Mechanism, in fact on Wednesday. It will be a well-grounded and ambitious proposal, because this is a big challenge and it demands a bold response. I hope that Member States will show a similar level of ambition as discussions on this move forward in the coming months”.

Earlier today the Commission issued a statement under the title “Commission proposes Single Resolution Mechanism for the Banking Union”. Commission President José Manuel Barroso said: “With this proposal, all the elements are on the table for a banking union to put the sector on a sounder footing, restore confidence and overcome fragmentation in financial markets. We have already agreed common European supervision for banks in the euro area and other Member States who wish to take part. Today’s proposal complements that with a strong and integrated single system for dealing with failing banks. We cannot eliminate the risk of future bank failures, but with the Single Resolution Mechanism and the Resolution Fund it should be banks themselves – and not European taxpayers – who should shoulder the burden of losses in the future.”

It is more than clear that the Commission insists on the creation of a strong and central bank resolution authority and mechanism. As Barroso points out it’s logical that the single supervision of Eurozone’s banks by the ECB should be accompanied by a single resolution authority. The cooperation between the Commission and the ECB is very close and productive.

According to today’s Commission proposal the Single Resolution Board will be made up by representatives from the ECB, the European Commission and the relevant national authorities (those where the bank has its headquarters as well as branches and/or subsidiaries). Obviously the central authorities, the Commission and the ECB, would control the majority of votes in this Board. It goes without saying that there will be only one board based in Brussels, probably in Commission’s headquarters and not 17 ‘outlets’ in national capitals. In total the Commission’s role would be to decide the triggering of the resolution of a bank and set the resolution framework, “ensuring its consistency with the Single Market and with EU rules on state aid, and safeguarding the independence and accountability of the overall mechanism”.

The European Parliament has consistently called for greater integration in the arrangements for resolving banks, and in a Resolution adopted on 13 June 2013 urged the Commission to adopt as quickly as possible the proposal establishing the Single Resolution Mechanism. It remains to be seen if Germany will be able to repel once more the prospect of a central bank resolution authority and mechanism.

Advertising

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

EU-Turkey relations: Erdogan plays the refugee card while beefing up gas operations in the Eastern Mediterranean sea

Commission makes it easier for citizens to access health data securely across borders

UN emergency relief fund has ‘never been more critical’: Guterres

Sassoli to EU institutions: “Be brave on EU recovery plan”

Why diversity needs your star power, as well as sponsors

UN report sheds light on ‘unimaginable horrors’ faced by migrants and refugees in Libya, and beyond

Youth platforms call on German Government to break down legal barriers for young volunteers and pupils

Could entrepreneurship be the real cure against the side effects of Brexit?

3 megatrends for the factories of the future

How smartphones can close the global skills gap for billions

The role of students in a migration crisis in Roraima, Brazil

Intensified Al Qaeda and ISIL activity in Yemen ‘deeply worrying’, says UN Human Rights Office

We can build an inclusive workplace, and it starts with empathy

UN working to prevent attacks on civilians in eastern DR Congo

To flourish in the Fourth Industrial Revolution, we need to rethink these 3 things

Appalling overall unemployment in Eurozone at 20.6%

Brazilian healthcare and the Global Compact for safe orderly and regular migration

Migration crisis update: lack of solidarity not only among EU leaders but also EU officials

A Sting Exclusive: “Europe needs decisive progress for stronger cybersecurity”, EU Commissioner Gabriel highlights from Brussels

The EU Parliament backs the ‘Right2Water’ initiative all the way through

In South Sudan, mothers teaching daughters ‘safer’ ways to survive rape

COVID-19: What to know about the coronavirus pandemic on 3 April

Drinking water: new plans to improve tap water quality and cut plastic litter

4 ways the way we make things can change for a sustainable world

The Next Web 2014, the biggest European conference on Internet so far and the Absence of Brussels from Amsterdam

Working with millennials, leaders say humility works better than bossing around

34 million Americans know someone who died after being unable to pay for medical treatment

COVID-19: Commission steps up research funding and selects 17 projects in vaccine development, treatment and diagnostics

Engaging ‘head and mind’, key for effective learning, says UNESCO chief on Literacy Day

Human Rights Council election: 5 things you need to know about it

Manipulating privacy and reaping the benefits of technology

New UN forestry project bids to help countries meet climate change commitments

The new crisis is already creeping into the financial system

Here’s how China is going green

5G and the growing need for national CTOs

Global climate change: consequences for human health in Brazilian cities

Is history a new NATO weapons against Russia?

Greek citizens to pay the price again but Tsipras risks losing next elections

Italy should boost investment in training for the future of work

Our global system has spun out of control. Here’s how to rebalance it

3 ways firms can master the digital challenges of the 4IR

European Agenda on Migration four years on: Marked progress needs consolidating in face of volatile situation

Are we sleepwalking into a new global crisis?

Are you breathing plastic air at home? Here’s how microplastics are polluting our lungs

Corporations must help shape a better world – or risk being left behind

European financial values on the rise

European Youth Forum and youngest MEPs call on President Juncker to keep his promise to Europe’s youth

EU to give more power to national antitrust authorities in a bid to secure regulatory fines

Humanity ‘at a crossroads’ as damage to planet poses growing risk to health, UN environment agency warns

UN rights chief ‘appalled’ by US border detention conditions, says holding migrant children may violate international law

Why COVID-19 poses a particular threat in the world’s slums

At UN, Cuba slams US ‘criminal’ practices undermining country’s development

Here’s how the EU is doing on gender equality

Every bite of burger boosts harmful greenhouse gases: UN Environment Agency

Why the fight against nature loss should be a business priority

Strength in unity: Commission makes recommendations for the EU’s next strategic agenda 2019-2024

EU budget: Stepping up the EU’s role as a security and defence provider

UN rights chief calls for release of hundreds abducted and abused in South Sudan

‘Mosques should be safe havens, not sites of terror’, says Guterres announcing UN plan to help safeguard religious sites

UN affirms ‘historic’ global compact to support world’s refugees

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