The Eurogroup+ is born to govern the EU Banking Union

Andris Vilks, Latvian Minister for Finance, Jeroen Dijsselbloem, President of the Eurogroup, Klaus Regling, Chief Executive Officer of the European Financial Stability Facility and Managing Director of the European Stability Mechanism (from left to right). (The Council of the European Union audiovisual services, 17/2/2014).

Andris Vilks, Latvian Minister for Finance, Jeroen Dijsselbloem, President of the Eurogroup, Klaus Regling, Chief Executive Officer of the European Financial Stability Facility and Managing Director of the European Stability Mechanism (from left to right). (The Council of the European Union audiovisual services, 17/2/2014).

The importance of the Single Resolution Fund, which is supposed to bear the cost of Eurozone’s failing banks, was underlined yesterday evening by the fact that the President of Eurogroup, Jeroen Dijsselbloem, the Dutch minister of Finance, baptized the group of people who will govern the function of the SRF as Eurogroup+. The Eurogroup is made up by the 18 ministers of Finance of the euro area member states.

Obviously the Eurogroup+ will be made up by the ministers of Finance of the countries which will participate in the European Banking Union that is the 18 euro area member states, plus the willing of the other ten EU countries. The ‘baptism’ took place yesterday during the Press conference which followed the regular Eurogproup and was conducted jointly by Dijsselbloem and the competent Commissioner Ollie Rehn. Today all that and some more issues will be discussed in the regular ECOFIN Council of the 28 EU ministers of Finance.

This statement comes in relation to the ongoing discussion with the European Parliament about the nature and the functioning of the Single Resolution Mechanism and Fund which are to take care of Eurozone’s failing banks. And there will be such banks, if Danièle Nouy Chair of the Supervisory Board of the Banking Supervision section of the European Central Bank, is to be taken seriously when she said that “if a bank has to go it will go”.

ECB does just the audit

Not to forget that the ECB has commenced a comprehensive assessment of the 130 largest euro area banks, involving asset quality reviews and the stress tests. Last week the Governing Council of the European Central Bank issued the decision ECB/2014/3, which identifies the credit institutions that are subject to this comprehensive assessment. Some days earlier the ECB had published the criteria and the methodology to be followed in the asset quality review, and confirmed the stress test parameters for the comprehensive assessment.

In the same line, the European Banking Authority announced that the capital thresholds for the baseline and adverse scenarios will be 8% and 5.5% Common Equity Tier 1 capital respectively. This means many banks of the 130 will need a lot more capital and very probably some of them may prove beyond limit of repair. At this point the work of the ECB as supervisor stops and commences the competence of the Single Resolution Mechanism and Fund.

Negotiating with the MEPs

Of course, winding down a bank out of those 130 is not a simple task at all. The first problem to be accounted for is what repercussions will arise from possible contagion effects to other institutions. Then, the relations of the country’s exchequer with the institution in question will be examined, plus a lot many other issues. Given the ability of even a medium-sized bank to hide incredible risks, to say the least, in its balance and off balance sheet accounts, it is impossible to predict the nature of the risks the ECB may find while exercising its supervisory role. That’s also why the Eurogroup wants to retain, through this Eurogroup+ body, the final decision to wind down a bank.

While the European Union decision-making and legislative bodies are currently shaping the Single Resolution Mechanism for failing banks, the Eurogroup alone is discussing the operational framework of the future European Stability Mechanism’s direct recap instrument. Yesterday afternoon Dijsselbloem said “We have made progress towards resolving the last outstanding issues and I am confident that we will come to a political agreement in time for our meeting in March”. Actually, he repeated what he had said in Davos, “That instrument we will finalize in March, so that will also be available on strict conditions on the outcome of the asset-quality review” conducted by the ECB.

All is a Eurogroup

Coming back to the Eurogroup+ meeting which followed the regular Eurogroup late yesterday evening, Dijsselbloem explained that after the Press conference “I will chair a ministerial meeting on the intergovernmental agreement on the functioning of the Single Resolution Fund, the so-called Eurogroup+…Negotiations are still ongoing at technical level so I don’t expect an agreement tonight, but I hope that…the negotiations on this agreement are concluded in March together with the trilogues ( ECOFIN, Parliament, Commission) on the SRM Regulation”. The agreement he refers to is currently under negotiations with the European Parliament.

European Sting readers have been informed about the intentions of the ECOFIN as they were formulated in the meeting of 18 December 2013. Central role in this respect is being reserved to this Intergovernmental Conference and Agreement which will decide almost on everything, a possibility rejected by the Parliament. The ECOFIN wants the cost of winding down a bank to be covered by the country in which the lender is based (many national Resolution Funds) and only in ten years this cost to be progressively shared or mutualized between all member states (merger of national Funds in one at the 10th year)). Mario Draghi proposed to cut down this period to five from ten years.

Negotiations around all those things were conducted until very late last night in the presence of representatives from the Parliament. The Single Resolution Mechanism is to consume most of the time of today’s ECOFIN Council and in it will be the single discussion issue after 12.15 H.

Advertising

Advertising

Advertising

Advertising

Advertising

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

4 innovative renewable energy projects powering Europe’s green future

China’s Ambassador to the EU Zhang Ming wishes to Brussels a Happy 2019 Year of the Pig

Putting a price on carbon will help New York state achieve a clean energy future

EU-Singapore trade agreement enters into force

Uganda’s Ebola preparedness ‘will go a long way’ says WHO chief

Bioethics: how to recover trust in the doctor-patient relationship

Encryption is under attack. Here’s why that matters

Practicing healthcare: Skills of a good healthcare professional and its effects

Work to make the world a better place: 5 things you need to know about ‘green jobs’

Mali just took a huge step towards universal healthcare

Not much of a help the new EU Directive on pensions

The UK to split if May’s hard or no-deal Brexit is pursued

This company is breeding millions of insects in the heart of London

Member states jeopardising the rule of law will risk losing EU funds

Regional competitiveness and growth: a Gordian knot for Europe

EU Budget: A Reform Support Programme and an Investment Stabilisation Function to strengthen Europe’s Economic and Monetary Union

European Parliament calls on Russia to end occupation of Georgian territories

European Commission Joint Research Centre opens world-class laboratories to researchers

Conditions deteriorating alarmingly in Yemen, warns senior UN official

“Private” sea freight indexes hide Libor like skeletons?

Tuesday’s Daily Brief: UNESCO ready to help after Notre Dame fire, and updates on Libya, Nicaragua, and the Cyclone Idai response

Who are the winners and losers in Africa’s Continental Free Trade area?

Greater transparency, fairer prices for medicines ‘a global human rights issue’, says UN health agency

Statement by the Brexit Steering Group on UK paper on EU citizens in the UK

Pakistan has just planted over a billion trees

Samsung’s profits fall as cheaper smartphones gain market share

UN health agency spotlights stalled effort to close health divide across Europe, in new report

EU Council agrees to reform the system for motor vehicles but with “restricted” power for the Commission

Can we create an empathic alternative to the capitalist system?

Scaling for success: SMEs, tech innovations and the ITU Telecom World Awards 2019, in association with The European Sting

European Court of Justice to Google: It is #righttobeforgotten but not #righttoberemembered

Is Eurozone heading towards a long stagnation?

China is a renewable energy champion. But it’s time for a new approach

UN member states express their will to tackle global migration but specific actions are still missing

Anti-vaccination scaremongering: What should we know about anti-vaccine argument?

UN chief urges India and Pakistan to dial down tensions in wake of Kashmir attack

10 of Albert Einstein’s best quotes

Distributed ownership: what it means and how it could transform India

Step up action to protect the planet during wartime: UN environment chief

Who will secure Lithuania?

Mental health and suicide prevention – What can be done to increase access to mental health services in my region?

In polarized America, a new divide looms

Massive cholera vaccine campaign planned for cyclone-ravaged Mozambique, as UN calls for ‘urgent’ step-up in support

Young migrants: Is Europe creating a lost generation?

UN atomic watchdog chief updates governing body on key North Korean reactor

“BEUC cautions against TTIP that would seek to align EU and US chemicals management frameworks”

Juncker Plan reaches almost €410 billion in triggered investment across the EU

How Japan became the world leader in floating solar power

Council’s position on Visa Directive a step back for young people’s mobility

Commission reports on progress in risk reduction in the Banking Union and calls for faster progress on Capital Markets Union ahead of EU Leaders’ meetings

Quicker freezing and confiscation of criminal assets in the EU

Libya: UN mobilized to support thousands uprooted by Tripoli clashes, renews call for humanitarian truce

ILO discusses world of work response to global refugee crisis

How well you age depends on what you think of old age

“Airbnb and YouTube are two great examples of a crowd based capitalism”, key stakeholders outline the boundaries of the 4th Industrial Revolution in Davos

What is the IMF telling Eurozone about fiscal and banking unification?

In Rwanda, high-speed drones are delivering blood to remote communities

These countries create most of the world’s CO2 emissions

‘Refrain from violence’ UN chief urges, as presidential election result is announced in DR Congo

Yemen talks: Truce agreed over key port city of Hudaydah

More Stings?

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