Close to final agreement on the EU Banking Union

Eurogroup meeting of 10/3/2014. (From left to right) Luis De Guindos Jurado, Spanish Minister for Economic Affairs and Competitiveness, Michael Noonan, Irish Minister for Finance, Jeroen Dijsselbloem, President of the Eurogroup and Dutch Minister for Finance, Ioannis Stournaras, Greek Minister for Finance. (Council of the European Union Audiovisual Services, 10/3/2014).

Eurogroup meeting of 10/3/2014. (From left to right) Luis De Guindos Jurado, Spanish Minister for Economic Affairs and Competitiveness, Michael Noonan, Irish Minister for Finance, Jeroen Dijsselbloem, President of the Eurogroup and Dutch Minister for Finance, Ioannis Stournaras, Greek Minister for Finance. (Council of the European Union Audiovisual Services, 10/3/2014).

Yesterday’s Eurogroup and today’s ECOFIN councils are convened almost exclusively to discuss the details of the two remaining gaps in the legal and of course the operating framework of the European Banking Union, which are, the Single Resolution Mechanism and the Resolution Fund. The two legislative bodies of the European Union, the Parliament and the Council, are at odds since the beginning of this year over the mechanism and the fund. The Council wants that the member states exercise a political clout over all decisions of the mechanism, while the Parliament demands that this should be avoided, in order all banks to be treated equally, irrespective of their country of origin.

Actually the member states have proposed the creation of a kind of Eurogroup+ council, to be made up also by Eurozone member state government representatives, who will decide everything about the Resolution Fund. This Eurogroup+ will be created by an Intergovernmental Agreement (IGA), outside the EU standard structures, exactly like an international agreement. The Parliament initially opposed this prospect.

Step by step

As things stand now the ECOFIN is expected today to give the Greek Presidency of the council a wider mandate to negotiate with the Parliament. Understandably the core issues are two; firstly the procedure to decide which bank is near or about to fail, and secondly who will pay for its resolution. Let’s start from the first issue.

The Regulation on the Single Supervisory Mechanism came into force on 15 October 2013 and bestowed the auditing and the supervision of Eurozone banks to the European Central Bank, a task that will be officially in force as from November 2014. Within this mandate the ECB may conclude which bank is about “failing or likely to fail”. The Parliament insisted that the ECB must be the only authority to decide that. Now however the legislative accepts that, “A mechanism could be envisaged to ensure that others can effectively voice their concerns”.

Compromise on the resolution mechanism

This mechanism is one of the two crucial points under negotiation between the two legislative bodies. However it seems that since the Parliament accepted the existence of a mechanism, through which “others can effectively voice their concerns” has almost resolved this issue. Understandably, what is left to be agreed to finalise the Single Resolution Mechanism refers only to technicalities. In reality it will be a mechanism involving the member states in the procedure to announce that a bank is ‘failing or likely to fail’, after an initial proposal of the ECB.

The important point in this procedure will be the time element. Such a discussion has to be concluded within one weekend, while the markets are closed. During regular working days official deliberations, about the eventuality of a bank being about or likely to fail, are out of question. The Parliament has insisted that this procedure should be swift and transparent.

Intergovernmental Agreement

This said, what remains to be negotiated during this week is the resolution actions concerning a specific bank. In this respect though there are still large differences on the involvement of the Resolution Fund. Obviously this question arises in case the bailinable funds of the lender are not enough to cover its resolution or recovery costs. They usually aren’t. The pecking order of the bailinable funds has already being finalized under the draft Bank Recovery and Resolution Directive. Then the Resolution Fund undertakes the responsibility to cover the extra costs. This is exactly what remains to be agreed between the Parliament and the ECOFIN.

Earlier mutualisation

Yesterday night, at the Press conference after the Eurogroup and the IGA meetings, the President of Eurogroup, Jeroen Dijsselbloem clarified that the member states can compromise with the Parliament on a number of points on the Resolution Fund. He said that the Eurogroup can accept a shorter period for the full mutualisation of the Fund and a more generous liquidity. Answering a question if this period will be closer to the three years the Parliament wants or to the seven years some ECOFIN member states accept, he answered that this will be decided over the next few days in the triangle negotiations between the Greek Council Presidency, the Parliament and the Commission. Full mutualisation means, that all Eurozone member states will be equally responsible for winding up every failing bank of the euro area. It will be the fully mature stage of the European Banking Union.

A second point that the Eurogroup decided to compromise on the terms of the IGA, is that during the transition period – before the full mutualisation of the Resolution Fund – the national compartments of the Fund could borrow/lend between them, under framed conditions. There was agreement with the Parliament that the Resolution Fund resources will be used after all the bailinable funds have been exhausted.

Negotiations on the Resolution Fund

Last but not least there was a unanimous agreement yesterday that there should be a final compromise between the three EU bodies, the Council, the Parliament and the Commission within this month, so as the MEPs can approve it in first reading during the April plenary, the last of this legislature before the May elections.

It’s very probable then, that during this week the basic elements of a compromise, over the function of the Resolution Fund, between the Council and the Parliament are in place. This said Dijsselbloem reportedly expects that by Wednesday the three EU decision-making bodies would come to an agreement over the Single Resolution Mechanism (decision-making procedure to wind up a bank). This will be a decisive step which will open the final phase of the negotiations on the IGA for the functioning of the Single Resolution Fund.

 

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

The digital revolution will transform the steel industry

This fascinating map shows how food moves around the US

EU Budget 2020 deal: Investing more in climate action, youth and research

The clothes of the future could be made from pineapples and bananas

UN will do ‘utmost to prevent and mitigate any risk of violence’ in DR Congo, pledges Mission chief

Brussels to point the finger to Washington for lack of commitment over TTIP

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

European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

UN chief urges emergency fund support as one of the ‘most effective investments’ in humanitarian action

The success story of a Chinese investment in the Greek port of Piraeus

COP24: green, gender focus, as UN’s crucial climate change conference gets underway

Thursday’s Daily Brief: Climate emergency, call to support breastfeeding, rising political heat and new investigation board for Syria

World Population Day: ‘A matter of human rights’ says UN

5 ways cities can use emerging technologies to fight climate change

Climate change: Parliament’s blueprint for long-term CO2 cuts

What is adversarial artificial intelligence and why does it matter?

FROM THE FIELD: Children in warzones denied right to education

5 technologies that will forever change global trade

Impressions of China

‘Counter and reject’ leaders who seek to ‘exploit differences’ between us, urges Guterres at historic mosque in Cairo

Promoting rule of law and fundamental rights in the EU

If we can build the International Space Station, ‘we can do anything’ – UN Champion for Space

Migration crisis: how big a security threat it is?

Human health – litmus paper for the climate change?

Amid continued suffering in Yemen, UN envoy welcomes reports of reduced violence

IQ scores have been falling for decades, new study finds

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

Yemen war: UN chief urges good faith as ‘milestone’ talks get underway in Sweden

Disease slashing global meat output, cereals boom, bananas under watch: FAO

European Parliament the most trusted EU institution

Autumn Fiscal Package: Commission adopts Opinions on euro area Draft Budgetary Plans

Sign language protects ‘linguistic identity and cultural diversity’ of all users, says UN chief

Trump ostracized by his party and world elites but still remains in course; how can he do it?

Biblioburro: The amazing donkey libraries of Colombia

Charlotte in Ghana

Tiny Iceland teaches the West how to treat bankers

High-flyers: China is on top of the world for skyscraper construction

What people want – ignore at your peril

Eliminating hepatitis calls for ‘bold political leadership, with investments to match,’ UN health chief says

Violence against women a barrier to peaceful future for all

Greece’s future solely in the hands of Tsipras; he can direct the poor country any way he likes

Global climate change: consequences for human health in Brazilian cities

Greenhouse gas emissions have already peaked in 30 major cities

Unemployment and exclusion brings EU cities to boiling point

May led Britain to chaos, now looks for way out with unpredictable DUP

European Business Summit 2014: Sting Report, Day I

How to bring precision medicine into the doctor’s office

Turkey to let EU alone struggle with the migrant crisis while enhancing its economic ties with Russia instead?

How to get ageing populations to invest in their health

Russia accepts what the EU has to offer and settles to negotiate with Ukraine

Scotland “shows the way” to separatist movements as Catalonia calls a vote on independence

Parlamentarians to “break up” with reality in the Google antitrust case

More unemployment and lower wages to make European workers competitive?

8 amazing facts to help you understand China today

Hate speech exacerbating societal, racial tensions with ‘deadly consequences around the world’, say UN experts

How tomorrow’s buildings will make you – and the planet – healthier

More billions needed to help Eurozone recover; ECB sidesteps German objections about QE


Re-thinking citizenship education: bringing young people back to the ballot box

EU and Japan select first Erasmus Mundus Joint Master Programmes

OECD Steel Committee concerned about excess capacity in steel sector

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