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.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

UNICEF urges ‘transformative shift’ in family-friendly work policies to reap ‘huge’ benefits

These chefs are fighting hunger and poverty with gastronomy

We can solve climate change – if we involve women

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

The West definitively cuts Russia off from the developed world

UN welcomes ‘milestone’ release of 833 Nigerian children from anti-Boko Haram force

EU–Canada Summit: strengthening the rules-based international order

‘Massive and protracted’ humanitarian crisis in DR Congo can be ‘beaten back’ if donors step up

On World Day to Combat Desertification, UN shines spotlight on ‘true value’ of land

The challenge to be a good healthcare professional

Why the Greeks forgave Tsipras’ pirouettes around austerity and voted again for SYRIZA

Erasmus+: a turning point in the lives of 5 million European students

Gender Science: A sneaky healthcare risk factor

7 of the world’s 10 most polluted cities are in India

G20 LIVE: “Our response needs to be robust…otherwise we will only find the fire we are trying to put out”, UN Secretary General Ban Ki-moon just lit up G20 in Antalya Turkey

Migration and rule of law on next ACP-EU Parliamentary Assembly agenda

MWC 2016 LIVE: The top 5 themes of this year’s Mobile World Congress

The West cannot ignore Russia; dazed Germany sitting on the fence

These countries are ranked highest – and lowest – for human development

Eurozone stuck in a high risk deflation area; Draghi expects further price plunge

Trade with the United States: Council authorises negotiations on elimination of tariffs for industrial goods and on conformity assessment

EU plans pan-European network of cybersecurity services

The US is withdrawing from a 144-year-old treaty. Here’s the context

An economist explains why women are paid less

On Youth Education: “Just a normal day in the life of a medical student”

UN experts decry torture of Rakhine men and boys held incommunicado by Myanmar’s military

The Parliament accuses core EU countries of exploiting their dominant political position

We need to rethink the way we heat ourselves. Here’s why

The US-Mexico trade deal a threat for others, Trump to single out China, Europe

What makes a good healthcare professional?

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

Marco Polo’s Dream

Joris in Indonesia

From Grexit to Brexit: UK industry now says the in/out referendum is good for your health

EU, Brazil to hold high level Summit in Brasilia

Five cities short-listed to become the European Youth Capital 2017

In Gaza, UN envoy urges Israel, Palestinian factions to step back from brink of a war that ‘everybody will lose’

Trump: Hostile to Europe, voids Tillerson’s “ironclad” ally pledge

Digital IDs and the Digital Economy: the (still) missing link?

UN condemns Syrian ‘war on children’ as up to 30 reportedly killed in clashes

The Eurogroup offered a cold reception to IMF’s director for Europe

Dangers of poor quality health care revealed ‘in all countries’: WHO report

MWC 2016 LIVE: Zuckerberg warns mobile industry not to ignore the unconnected

Discovering Europe: Free EU rail pass for 18 year olds

UN chief saddened at news of death of former US President George H.W. Bush

Trump fines China with $50 billion a year plus some more…

Wind farms now provide 14% of EU power – these countries are leading the way

Parliament adopts new rules for short-stay visas

Migration crisis update: Greece could probably say goodbye to Schengen really soon

Western Balkans: MEPs take stock of 2018 progress

The future of energy in Puerto Rico is renewable

Silicon Valley can do more to achieve the #GlobalGoals

Brexit update: Leave campaign leads race but undecided voters will determine the outcome of the EU referendum

Food system failures in our age of abundance

Why Trump’s tariffs are good news for US garlic farmers

5 ways to go green in your own kitchen

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

Forced pregnancy in Italy violated ‘woman’s human right to health’, UN experts rule

On their epic journeys, migratory birds connect nations and inspire people, UN says on World Day

100 years after Polish independence, 5 reasons to be cheerful for the future

More Stings?

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