The Parliament paves the way for the creation of the European Banking Union

European Parliament. ECON Committee meeting - Debate with National Parliaments. In the foreground Elisa Ferreira (S&D, PT), ECON Rapporteur on the rules dealing with struggling banks. (EP Audiovisual Services).

European Parliament. ECON Committee meeting – Debate with National Parliaments. In the foreground Elisa Ferreira (S&D, PT), ECON Rapporteur on the rules dealing with struggling banks. (EP Audiovisual Services).

Today, 18 October, is the last day for MEPs to table their amendments with the Parliament’s Economic and Monetary Committee, in the process of formulating the legislature’s proposal for an EU mechanism to sort out troubled banks. This is the much debated bank resolution and recovery mechanism and fund. The Committee vote is planned for 25 November. After that, the lead MEPs will enter into negotiations with the Council to conclude a final deal.

The European Parliament has by now come very close to formulating a complete proposal on the bank resolution and recovery mechanism and fund, which is expected to eke out the creation of the European Banking Union. According to the Parliament’s proposal, as it has been formulated so far, the key features of this mechanism will be a single resolution authority based in Brussels under the roof of the Commission, and a resolution fund able to borrow from an EU loan financial facility (obviously the ESM plus other sources) until it becomes self-financed. The parliament also introduces a strong risk element in calculating banks’ contributions to the resolution fund. Risky players will pay more. Let’s see the details of the Parliament’s proposal.

The Parliament deal

According to a Press release issued by the Committee, its Rapporteur on the rules dealing with struggling banks Elisa Ferreira (S&D, PT) backed the key elements of the Commission‘s proposal including “placing the EU executive at the heart of the system”. She nonetheless tabled amendments requiring a financial safety net until the EU bank crisis fund is fully funded, strengthening depositor protection, and clarifying responsibilities at each stage of dealing with a failing bank. The amendments also step up European Parliament oversight.

The new feature in Ferreira’s proposal is that she upholds the distribution of responsibilities and of course of the financial burden resulting from a bank resolution or reshuffling, among the players involved. This is close to what the President of the European Central Bank, Mario Draghi, has proposed for the early resolutions, which might prove necessary to be conducted, before the resolution fund is fully operational.

Ferreira commented that “In its infancy, the proposed resolution fund, which is to finance the winding down or propping up of troubled banks, will be credible only if it has backstop funds to tap into”. This was exactly what Draghi has said not only in relation with the possible resolution or recovery of a bank, but also in order to make credible the forthcoming bank crash test. At this point it must be reminded that the other pillar of the Banking Union, the Single Supervision Mechanism, is ready and will assume its task as of November 2014, being institutionalised under the roof of the ECB.

Credible crash tests

The central bank has already started hiring people for this new and completely independent department. However, before this service engages in its regular supervision activities in a year from now, the ECB will run an extensive audit on the assets of the around 200 Eurozone banks, that it is supposed to directly supervise. Those crash tests will be conducted some time next spring and the ECB has hired a private auditing firm to assist in this task. The relevant broad principles of those tests will be soon made public by the ECB.

In order for those tests to be credible though, Draghi says that a fully operational bank resolution and recovery option must be in place. Obviously, it will be meaningless to conduct far-reaching bank crash test and not being able to deal with problems which may arise from this audit.

Returning to the other pillar of the Banking union, the resolution mechanism has already acquired the possibility to recapitalise banks. This is needed to face up to early problems before the resolution and recapitalisation fund is fully operational. To clarify things on this issue, Jeroen Dijsselbloem, the President of Eurogroup, answered a journalist’s relevant question while entering the Ecofin meeting in Luxembourg on 15 October. He stressed that “Last June we reached an agreement on the main elements of direct recapitalisation from the ESM (the wealth European Stability Mechanism), as part of Single Supervision Mechanism regulation. In special circumstances the ECB can start its supervisory work earlier on particular institutions. In that case direct recap could be possible”.

All in all, if the Parliament and the Council, including Germany, agree to a deal before 25 November, the Parliament could endorse it then. In that case all the basic elements of the European Banking Union will be there; the Single Supervision Mechanism under the ECB and the Single Resolution Mechanism under the Commission. As for the Single Resolution Fund, it will be able to borrow from an EU loan facility, comprising the ESM and the implicated parties including the member states.

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

Coal addiction ‘must be overcome’ to ease climate change, UN chief says in Bangkok

The EU now has rules that say household appliances must be easier to fix

UN mobilizes in Rohingya camps to support babies born of rape; young mothers face stigma

US-China trade war: Washington now wants control of the renminbi-yuan

Larger species are more at risk of extinction than smaller ones – here’s why

Von der Leyen in Ireland: Our mutual solidarity is here to stay

MEPs call for EU rules to better protect minorities’ rights

Responsible Artificial Intelligence

Ukraine: The West and Russia negotiate shares of influence

Commission tries to solidify the EU statistical system

9 climate tipping points pushing Earth to the point of no return

We can make sure Globalization 4.0 leaves no one behind. This is how

Legal Manager – 2050

Taking fast road to ‘e-mobility’ central to a sustainable future: COP24

Why exchange programs are essential for the medical students of the 21st century

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

Is a full course lunch, a new Commissioner and 2 million anti-TTIP citizens what you would call a “Fresh Start”?

Mood changes in Europe in favour of growth and jobs

These deepwater fish farms could help natural stocks recover

Greater investment in family-friendly policies critical to support breastfeeding – UNICEF

What can each individual do to lessen the burden of mental health in times of the pandemic?

Venezuela: UN human rights office calls for ‘maximum restraint’ by authorities in face of new demonstrations

UN police officer recognized for protecting vulnerable Somali women from abuse

Scotland and First Minister Salmond enter the most challenging battlefield for independence: Europe

Team Europe: EU and Germany join forces with the Government of Bangladesh to safeguard the livelihoods of workers in export-oriented industries

The Five Chinese Girls

ECB to support only banks not Peoples

Why is the EU launching a doomed policy in stopping immigrant waves? What are the real targets?

Is the English language too powerful?

State aid: Commission amends Short-term export-credit insurance Communication in light of economic impact of coronavirus outbreak

Who can unlock the stalled Brexit negotiations? UK Premier sticks to her proposal

JADE Spring Meeting 2017 – day 3: JADE Academy trainings, networking session and gala dinner – Excellence Awards winners revealed

Japan must urgently address long-standing concerns over foreign bribery enforcement

3 ways business leaders can build digital trust

This wall of shoes is for the women killed by domestic violence

Here’s how the EU is doing on gender equality

The vegan economy is booming – and Big Food wants a slice of it

Greek-Turkish border: MEPs reject Turkey’s pressure, demand common asylum rules

How can consumers be effectively protected from insurance sellers?

The Changing Scope of International Economic Relations – Chinese Leadership in the 21st Century

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

Gender equality and medicine in the 21st century

Sri Lanka PM: This is how I will make my country rich by 2025

Fairer, simpler, more flexible EU farm policy: MEPs vote on post-2020 reform

Calculators didn’t replace mathematicians, and AI won’t replace humans

At UN, Yemen Foreign Minister demands end to ‘Iranian-Houthi coup d’etat’

Parliament wants to grant EU consumers a “right to repair”

Which countries get the most sleep – and how much do we really need?

Brazilian mountain farmers reap recognition, through UN heritage listing

To what extent can renewable energy empower women in rural communities?

UN forum spotlights cities, where struggle for sustainability ‘will be won or lost’

Britain declares trade war on mainland Europe

Education should be like everything else. An on-demand service

Business can be profitable AND drive progress on societal priorities

Pride in health care during Pride Month: Are we ready for a dignified health care for LGBTQI+ patients?

EP negotiators: recovery plan crucial, but do not trade long-term for short-term

MEPs back EU partnership agreement with Armenia

Gaza probe finds ‘reasonable grounds’ Israeli forces committed international human rights violations

Minding the information gap and why it’s important in tackling COVID-19

Energy Union: deals on efficiency targets and governance

More Stings?

Advertising

Comments

  1. Introduction to Bank Recapitalization

    http://iakal.wordpress.com/2014/05/12/bank-recapitalization/

  2. If you desire to increase your know-how only keep visiting this
    web site and be updated with the most recent news update posted here.

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