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

Prepare for a ‘new normal’ as lockdown restrictions ease: Monday’s COVID-19 WHO briefing

Rare Disease Day: a new EU platform to support better diagnosis and treatment

Seaweed, enzymes and compostable cups: Can ‘Big Food’ take on plastic and win?

States with power and influence to end suffering of Yemenis must take action ‘immediately’ – UN rights chief

ECB’s €1.14 trillion again unifies Eurozone; Germany approves sovereign debt risks to be pooled

The Indian case: health policies need to keep pace with public health literacy

EU Youth Conference in Amsterdam: enabling young people to engage in a diverse, connected and inclusive Europe

What washing your hands can teach you about global change

UN Convention that promotes mediation to resolve trade disputes moves closer to entry into force

UNICEF urges all countries to provide ‘Super Dads’ with paid leave

Appreciation of euro to continue

Myanmar: Departing UN rights expert still hopeful for democratic transition

The UN’s unyielding effort to tackle sexual abuse and exploitation: our quarterly update

This man is sleeping out in the Davos cold to make a point about homelessness

MEPs to prioritise environment and climate action in next long-term budget

‘Air bridge’ vaccination operation begins for Ebola-hit communities in DR Congo

ECB’s Draghi favours a cheaper euro to serve all Eurozone countries

UN, Somali Government seek $80 million in immediate relief for flood-affected populations

3 reasons why AI won’t replace human translators… yet

More effort needed to improve equity in education

One in three Venezuelans not getting enough to eat, UN study finds

The Great Reset needs great leaders to help the most vulnerable

The dark side of Diwali, festival of lights

Security Council extends mandate of UN Interim Force in Lebanon for a year

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

Eurozone: There is a remedy for regional convergence

Libya: $202 million needed to bring life-saving aid to half a million people hit by humanitarian crisis

4 reasons why women should lead the G7 agenda in 2018

Electronic cigarette – is it really a safer alternative to smoking?

Female leaders warn about the erosion of women’s rights

Microplastics have been found in Rocky Mountain rainwater

Why the answer to a more sustainable future could lie within the platform economy

This is how India can become the next Silicon Valley

The role of junior entrepreneurs as a bridge between academia and business world

Climate change brings a host of other risks for businesses

Ahead of State of the Union the European Youth Forum highlights lack of action on youth employment

30 years of tissue engineering, what has been achieved?

Using the quarantine to your advantage

The glimmers of hope in the latest dire climate report

EU adopts €55 million support package for Syrian refugees and local communities in Jordan and Lebanon to mitigate coronavirus pandemic

The United Kingdom’s decision to leave the European Union will impact young people’s future the most

Quarantine: A mental health guide for every mood

Bilbao’s city parks offer brain-training games for the elderly

Health Committee MEPs back plans to boost joint assessment of medicines

Recession: the best argument for growth

Study: Trade supports over 36 million jobs across the EU

Italy should boost spending and strengthen cooperation and integration of employment services to help more people into work

‘Highly explosive’ escalation of conflict and displacement across Syria’s Idlib, says top UN official

Companies can help build a more inclusive world. Here’s how

How much more political is the new EU leadership? Does this include personal bend?

Tropical Cyclone Idai affects 1.5 million across Mozambique and Malawi, as UN ramps up response

Constitution of the 9th legislature of the European Parliament

Banking package: Parliament and Council reach an agreement

The European Parliament wants to stay in one place

How technology can help India breathe more easily

European Union supports survivors of sexual violence in conflict

COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

A multipolar world brings back the national champions

Why is the Strait of Hormuz so important?

The French army is enlisting sci-fi writers to predict the future

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