Brussels, 27/04/2010 (Agence Europe) - On Tuesday 27 April, the European Parliament economic and financial affairs committee held an exchange of views on the amendments to the legislative package reforming the European system of financial supervision. They discussed a number of thorny issues, such as European supervision of entities of systemic importance and the creation of two funds to be paid into by the private sector to guarantee deposits and prevent future banking crises. The Council, in its political agreement of December, did not make provision for these two points, which it sees as lines in the sand. Uncertainty hangs over the Committee vote on Tuesday 4 May. Several MEPs would prefer things to take the time they take, while others are concerned by the delays caused by the recent disruption of European air traffic.
Funds. Rapporteur on the draft regulation bringing in the European Banking Authority José Manuel García-Margallo y Marfil (EPP, Spain) suggests setting up two European funds, rather than one as was initially proposed in his draft report, to go along with the integration at European level of financial supervision which many MEPs are calling for. The two funds, in which money would be put by the banks of systemic importance in line with the nature of the risks their activities run, would be used to: - guarantee savers' deposits; - fund ordered restructuring of financial institutions whose failure would seriously affect financial stability. This second fund would be managed by representatives of national authorities and would be able to increase its resources by issuing debt instruments. The rapporteur says that measures are also needed to ensure that the existence of the fund does not compound moral uncertainty (situation in which financial entities take excessive risks because they are sure that the systemic nature of their activities will always force public authorities to intervene to save them). “A blanket has to be put in place to break the fall of systemic financial institutions so that it is necessary to turn to taxpayers as a last resort,” he said, stating that the criteria used to determine who would contribute to these funds, and how, would differ according to the nature of the funds.
A number of British MEPS, such as Vicky Ford (Conservative) and Peter Skinner (Labour) felt that discussion on introducing financial funds should be held when debating the Ferreira report on financial crisis prevention and management.
Setting up funds paid for by financial institutions of systemic importance requires this type of entity to be defined by means of specific criteria. García-Margallo y Marfil said only that these criteria should be in line with those established by the Financial Stability Forum (FSF), the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). He linked these criteria to banks' commercial models and to relations between the parent bank and its subsidiaries in the same group. Specialists say that a combination of various criteria comes into play, not just the size of the institution, Sylvie Goulard (ALDE, France) observed. She warned of the risk of massive competition distortions between those institutions which were on the list of entities of systemic importance and those which were not. Once the criteria have been decided, it will be up to the European Banking Authority, acting on a proposal from the European Systemic Risk Board, to draw up and maintain a list of institutions which are systemic in nature to be subject to European supervision. (M.B./transl.rt)