Brussels, 13/04/2010 (Agence Europe) - On Monday 12 April, the economic and monetary committee at the European Parliament held an exchange of views on the draft own-initiative report by Elisa Ferreira (S&D, Portugal) on crossborder crisis management in the banking sector. Several members doubted it was appropriate to foresee specific measures for banks of systemic importance due to the fact that it is difficult to identify such entities, and due to competition issues. The vote on the report will be held on Tuesday 22 June in parliamentary committee and in September in plenary session.
In her draft report, Elisa Ferreira suggests that the future European framework for financial crisis management, which is to be presented by the European Commission by the end of 2011, should contain specific provisions for systemic banks. These financial institutions, which form a group of 40 to 50 establishments holding 70% of banking assets in Europe, should be subject to a specific European banking law, she said. They would be supervised by the future European Systemic Risk Board (ESRB) and the European Banking Authority (EBA), as set out in the “financial supervision” package. These bodies would come into motion as soon as a given level of risk for financial stability has been reached. It is up to the ESRB to establish a complete list of such bodies on the basis of criteria defined by the European Commission.
Astrid Lulling (EPP, Luxembourg), who underlines how difficult it is to define “objective criteria” allowing the banks in question to be identified, believes it would be better to develop a “European framework applicable to all crossborder banks” rather than different rules according to the nature of the banks. The problem, said Pervenche Berès (S&D, France), is not that of knowing whether a bank is active in 15 member states but rather the “impact on the internal market” if a financial institution fails. Speaking on behalf of her Swedish counterpart, Olle Schmidt, Sylvie Goulard (ALDE, France) underlined the importance of “non-differentiation” between banking actors in order to avoid gaps in the regulations.
Elisa Ferreira suggests a European financial stability fund should be set up, a fund which would be supplied in an ex ante and gradual manner by the systemic banks depending on the risks run. Managed by the EBA, the fund would serve to finance all kinds of intervention intended to safeguard financial stability. It would be independent of national deposit guarantee systems. The Commission, which would be expected to make a legislative proposal in April 2011, would develop guidelines on managing the fund's assets. It is better to have a European fund than a tax when it comes to available liquidity and enhancing protection against failure of a European dimension, the Portuguese Socialist said. She stressed it was important to maintain consistency with discussions at the EP on the financial supervision package. In his draft report on the EBA, José Manuel García-Margallo y Marfil (EPP, Spain) puts forward the idea of a fund supplied by banks and able to issue debt instruments (EUROPE 10075).
If banks refuse to step up their own funds for competitive reasons, they must agree to discuss a rescue fund, warned Pervenche Berès. Sharon Bowles (ALDE, UK) said it was necessary to foresee “penalties” for banks that call on the fund. However, according to Danuta Hübner (EPP, Poland), this kind of fund could encourage systemic banks to believe that they will always be helped out in times of need. Kay Swinburne (ECR, UK) spoke of the American proposal which, instead of a fund, suggests that major banks should issue securities which, upon ten-year maturity, would have an impact on their balance sheet. Sven Giegold (Greens/EFA, Germany) went on to request that there should be rules stipulating that bank creditors pay more in the case of a rescue operation.
Several committee members highlighted how important it was for the subsidiaries or branches of a parent company in a group to be treated on an equal footing. Agreeing with Danuta Hübner, Astrid Lulling spoke of these parent companies in difficulty which, in times of crisis, act like “pumps sucking up as much liquidity as possible from their subsidiaries”. “If there is failure, the initial assets of branches or subsidiaries disappear for ever for the creditors”, she criticised. (M.B./transl.jl)