Parliament: Last compromise on bank single resolution mechanism

European Parliament. Plenary session, week 6, 2014 – Discussion on the Single Resolution Mechanism and a Single Bank Resolution Fund. Evangelos Venizelos, Deputy Prime Minister and Minister of Foreign Affairs of Greece, has the floor. Greece holds the rotating Council Presidency during the first half of this year. (EP Audiovisual Services, 04/02/2014).

European Parliament. Plenary session, week 6, 2014 – Discussion on the Single Resolution Mechanism and a Single Bank Resolution Fund. Evangelos Venizelos, Deputy Prime Minister and Minister of Foreign Affairs of Greece, has the floor. Greece holds the rotating Council Presidency during the first half of this year. (EP Audiovisual Services, 04/02/2014).

Undeniably, the European Banking Union’s prime target is to definitely cut the umbilical cord between banks and sovereigns, through the creation of a uniform supervision and insolvency dealing environment for all Eurozone lenders. Yet, Germany and France insist that the final decision for the resolution of a failing bank must be taken by member state governments. In view of that, the European Parliament, while being a political institution par excellence, insists that governments and politicians should not have a say or at least not the final word in the procedure to take the difficult decision to resolve or recapitalize a bank.

From a legal point of view, as things stand now, the European Central Bank, being the supervisor of Eurozone’s banking industry, can singlehanded decide if a bank has or is close to fail. Then the supervisor delivers the lender to the next stage, where the Bank Recovery and Resolution Directive prescribes the exact procedure and the use of resources in resolving or recapitalizing a bank (bail-in). There is really not much to discuss, except on the creation of solid backstop in case the bail-in funds are not enough to complete the recovery or the resolution. Still, Germany and France insist that decisions, including the resolution and the use of funds, should be placed under the authority of governments, through the time consuming and hazy procedures of the Council.

No more grey zones

This is a clear attempt to continue nurturing the gray dealings between governments and banks. Up to now the major commercial banks, practically in all member states, have indirectly or directly supported government policies by intervening in national sovereign bond markets. All that led to the 2010 financial crisis, where the major Eurozone banks had imprudently lent to sovereigns hundreds of billions.

Now, after the ECB has been definitively mandated with the task to supervise all Eurozone banks, and the Bank Recovery and Resolution Directive being in force, what is left is only to institutionalize the single resolution mechanism and fund. Exactly at this point the European Parliament rejects the invilvement of the Council in all the crucial steps in deciding and funding the resolution of a lender. Given that these procedures have to be institutionalize within this legislature, before the May elections, the Parliament has offered to Council a series of compromises.

Compromise or lose everything

However the ECOFIN council has made only minor concessions and yesterday the Parliament stated that, “We continue working constructively with the Greek Presidency and foresee that we are close to finding compromises on many technical aspects of the regulation. On the essential issues however, namely the decision-making processes and the single resolution fund, we remain far apart. The Presidency has been deprived of sufficient room to make more than cosmetic changes and, although we are ready to factor in some concerns raised by member states, we cannot sign off on a deal which establishes a mechanism which is unfit for purpose. The ECB, the Commission and many economists have raised these concerns too. A potentially unworkable resolution system will jeopardise banking union and leave taxpayers exposed”.

The truth is that while the European Parliament and the ECB have a European vision, the ECOFIN Council remains a ‘representative’ of the politically strong governments, namely of Germany and France. The Parliament now tries to remind to the Council that the “ECB must be the only authority to decide whether a bank is failing or likely to fail”. It is impressive that all the all the main political groups of the Parliament are unanimous in defending a truly European Banking Union. To underline this, the statement issued yesterday by the parliamentarians is signed by all the lead MEPs in charge of the negotiations for the second pillar of the banking union that is the single resolution mechanism. The Press release is signed by Sharon Bowles (ECON Committee Chair), Elisa Ferraira (S&D, PT), Corien Wortmann Kool (EPP, NL), Sylvie Goulard (ALDE, FR), Sven Giegold (Greens/EFA, DE) and Vicky Ford (ECR, UK).

No to a politically controlled Banking Union

The MEPs “restate that they will not sign up to a system with serious and evident flaws”. Their main concern is that the resolution mechanism as proposed by the Council leaves ample room for unequal treatment of banks, according to their country of origin. It is a crucial moment where the MEPs want a truly European bank resolution mechanism, while the strong member states want to install in Eurozone a kind of ‘financial directory’. The legislators point to the Council that “Resolution actions concerning a specific bank should be decided only at the executive board level to avoid political power-games and ensure that banks receive equal treatment, irrespective of their country of origin. A role for the Council in decisions on a bank’s resolution must be avoided”.

Concerning the resolution fund and the ten year period as the Council demands for the creation of a truly European backstop mechanism, the Parliament proposes to cut down to three years the time for full mutualisation of the financial responsibilities, stemming from a bank resolution. Underlining its decisiveness to work towards a transparent and effective bank resolution system, the legislators note that the “Parliament will in any case take a plenary vote in April to close its first reading, whether there is an agreement with member states or not”.

Now the ball is in the Council’s yard and Germany and France have to decide what kind of Banking Union they want.

 

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

No barriers to free flow of non-personal data in the EU

Gender parity has a huge role to play in the fight to save our oceans

UN investigates systematic sexual violence across South Sudan

‘End the ongoing atrocities’ against people with albinism in Malawi, say UN rights experts

This entrepreneur is helping farmers get food to consumers during lockdown

Get out, stay out: how financial resilience helps end poverty

New UN poverty report reveals ‘vast inequalities’ between countries

Czech PM should resolve his conflict of interest as a matter of urgency say MEPs

Global hunger is on the rise. These simple steps could help eradicate it

The EU checks the multinationals for tax fraud but Britain may sail out of the EU via Panama

New UN Global Climate report ‘another strong wake-up call’ over global warming: Guterres

EU tells Britain stay in as long as you wish

These chefs are fighting hunger and poverty with gastronomy

‘Ticking bomb’ health warning over deteriorating conditions facing Cyclone Idai victims

Yes, together we can make a change! YO!Fest and EYE 2016

Can the EU afford to block China’s business openings to Europe by denying her the ‘market economy status’?

It takes far too long for a rare disease to be diagnosed. Here’s how that can change

How Jack Ma sees a thriving future of entrepreneurship in Africa

How to create a world where healthcare is a right, not a luxury

Food safety: more transparency, better risk prevention

Why the West supports the yen’s devaluation and Japanese over-indebtedness

World in grip of ‘high impact weather’ as US freezes, Australia sizzles, parts of South America deluged

Women in video games: ‘Accept it, or don’t buy the game’

Human Rights Council election: 5 things you need to know about it

Peru should help more young vulnerable people into work

COVID-19: Both WHO and Europe must learn from the current pandemic, say MEPs

Better air pollution data is helping us all breathe easier. Here’s how

Does the “climate change” require ombudsman services for environment?

Digital technology helped create the skills gap. Here’s how it can help close it

Did young people just kill television?

Restoring prospect of peace in Middle East is ‘our shared responsibility’ UN envoy tells Security Council

‘We will not give up on looking for peace for South Sudan’: UN deputy chief

EU-Turkey relations: Erdogan plays the refugee card while beefing up gas operations in the Eastern Mediterranean sea

Is Haiti better prepared for disasters, nine years on from the 2010 earthquake?

Timor-Leste Foreign Minister highlights value of UN in resolving conflicts

This new way of understanding disease is changing medicine

Asia-Pacific showing ‘decisive leadership’ on road to 2030 Sustainable Development Goals, deputy UN chief tells key forum

UN honours peacekeepers who ‘paid the ultimate price’, for the sake of others

FROM THE FIELD: Keeping Morocco’s indigenous culture and conservation in balance

THE COMMITTEES: ‘All roads lead to the Fifth’

‘Building back better’ – here’s how we can navigate the risks we face after COVID-19

Canada leading the way on women’s inclusion and empowerment, says OECD

Facebook: MEPs demand a full audit by EU bodies to assess data protection

Cultural Intelligence: the importance of changing perspectives

Central banking in times of complexity

Here’s how sustainable aviation fuel can take off in Europe

The European Council takes more measures to stem illegal migration

Legendary Harlem Globetrotters slam-dunk at the UN, with message that brings families, nations together

Eastern Partnership: Commission proposes new policy objectives for beyond 2020

ILO and EIB join forces for more and better quality employment

5 things you need to know about water

France-Germany: Divided in Europe, USA united in…Iran

‘Don’t forget Madagascar’s children’, UN appeals for long-term help as emergency worsens

EU Budget 2019: focus on the young, on migration and innovation

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

Take action on air pollution to save lives, and the planet, urges UN chief

‘Pioneering’ former Chilean President Michelle Bachelet officially appointed new UN human rights chief

Parliament ready to fight for a different EU budget

Tuesday’s Daily Brief: prizewinning journalists freed in Myanmar, new tracking tool for suspected terrorists, and a global bid to stop snakebite deaths

UN rights chief slams ‘unconscionable’ US border policy of separating migrant children from parents

More Stings?

Advertising

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