The Parliament defies a politically biased Banking Union

The European Parliament prepares for the fight which is about to begin with the Council, over the negotiations on the creation of the Single Resolution Mechanism and Fund to deal with failing banks. This will be the last step towards the completion of the European Banking Union, the major EU project after the introduction of the euro. On Thursday morning there was supposed to take place a meeting, marking the start of negotiations between the European Parliament and the Greek Presidency representing the Council. The target is to agree on the text of the Regulation enacting the single resolution mechanism (SRM) and Fund at first reading in the European Parliament before the end of the current legislature in May 2014. The subject matter of Thursday’s meeting was to discuss a text drafted by the euro-area member states in the ECOFIN Council on 18 December, committing them to negotiate, by 1 March 2014, an intergovernmental agreement on the functioning of the Single Resolution Fund. This SRF is expected to cover the additional costs of bank resolutions, after the funds of the shareholders and the unsecured creditors and depositors have been used and exhausted. The unwanted intergovernmental meeting Unfortunately no relevant Press release was published by the Greek Presidency or the Council after this first intergovernmental meeting, expected to have dealt with the details of the SRF. However, ahead of Thursday’s meeting the Parliament issued a tough Statement signed by the Chair of the economic and monetary affairs committee, the designated Rapporteur and the shadow rapporteurs. Understandably, the Parliamentarians wanted to make their opinion known ahead of the meeting for which the Presidency and the Council kept silence. The Parliament’s Press release was very informative. It contained the following paragraph: “The negotiating team of the European Parliament is united behind the strong mandate it received from the economic and monetary affairs committee. This mandate does not provide for any need for an intergovernmental agreement to formulate the details on the functioning of the single resolution fund to be used in bank resolution”. This statement is signed by Sharon Bowles (ALDE, UK), Chair of the economic and monetary affairs committee of the Parliament, Elisa Ferreira (S&D, PT), house rapporteur, Corien Wortmann-Kool (EPP, NL), Sylvie Goulard (ALDE, FR) and Sven Giegold (Greens/EFA, DE). Obviously all of them do not seem willing to negotiate the establishment of an intergovernmental conference, which predictably will decide all the details of the functioning of the SRF, in the absence of parliamentarians. What Germany wants Let’s recall what the ECOFIN Council decided on 18 December, understandably under the pressure of Germany. The relevant passage goes like this, “The Council agreed a general approach on a proposed single resolution board and a single fund for the resolution of banks. The compromise consists of a draft regulation on the single resolution mechanism (SRM), and a decision by euro-area member states committing them to negotiate, by March 2014, an intergovernmental agreement on the functioning of the single resolution fund. Negotiations with the European Parliament will now start, with the aim of agreeing the regulation on the SRM at first reading before the end of the Parliament’s current legislature (May 2014). Ministers also adopted a statement on the design of a backstop for the single resolution fund”. In this way the ECOFIN Council has decided almost all the details of the bank resolution mechanism, including the functioning of the Board and the Fund. As the European Sting has explained on many occasions during the past few weeks, the Board will be politically controlled, simply because it will be composed by representatives of member state governments. Consequently its decisions, determining if a bank would be resolved or rather saved will be politically influenced. As far as the cost of a bank resolution is concerned, it will continue to weigh the member state in which the failing lender is registered. This arrangement will last for at least four to five years, until the national Resolution Funds start to merge sometime around the year 2020. In short, over the next few years the Banking Union will be only a union in name, because the motto ‘everybody for himself’ will continue to prevail. The Parliament disagrees Now the Council expects the European Parliament to endorse, without major changes, this brand new institution and procedure as a ‘fait accompli’. That’s why the Parliament negotiators from the beginning contested  the need for a politically controlled intergovernmental agreement, authorised to decide on everything. In view of that, the five parliamentarians also stressed that, “We re-state our crucial requests that all banks must be treated equally, irrespective of which country they are established in, and that the system must be credible and efficient”. No wonder if the negotiations between the Parliament, the Presidency and the Council exhaust or even break all deadlines. The legislators will certainly question the time-table set by the Council, planning to conclude the intergovernmental agreement by March and the whole affair by May. However, the Parliament is expected to contribute positively towards the conclusion of the Banking Union legislation within this legislature.