Brussels, 20/10/2010 (Agence Europe) - "The bailout of the financial system was colossally expensive, with debts paid by the citizen which will continue to be paid by the future generations. This is morally unacceptable, socially unfair and politically devastating", said the Commissioner for the Internal Market, Michel Barnier, on Wednesday 20 October, when presenting his vision of the European framework for the management of crises as a result of a bank collapse (EUROPE 10236). "This is why we would like to build a culture of prevention and European reflex" in this field, he added, stating that he feels that his proposals are in line with work underway at national level. Further to a public consultation at the December, the Commission will present its legislative proposals in spring 2011.
The European Commission presented a toolbox to be used by the national supervisors to prevent financial institutions from getting into difficulties and to act promptly at the first sight of a problem. Amongst other things, he referred to the creation of "resolution colleges", based on the model of the colleges of supervisors provided for in the European directive governing bank capital requirements. These resolution colleges, which could be made up of the banking supervisors at competent judicial authorities, would be authorised to "appeal to the creators, put a stop to the distribution of dividends or change the management team", he stressed, whilst acknowledging that the triggers which will allow measures to be taken have yet to be discussed.
The European crisis management framework will apply to all banks and investment funds of systemic importance. Preventatively, these financial institutions will be obliged to create resolution plans which will detail the actions they will take in the event that they are faced with major problems, such as a loss of liquidity or excessive exposure to risks. Although they are obliged to act early, the national supervisors would be authorised to oblige an establishment to cease certain activities which they feel are too risky, to increase its own funds and cash reserves, to stop dividend payouts or make changes to its legal structure. If any of the decisions which are vital to keep a financial entity afloat do not comply with its shareholder rights, these would be accompanied by a device allowing any protagonist to appeal if they feel that they have lost out.
Financing. The Commission is of the opinion that the European crisis management framework scheduled to be in place in 2012 should be paid for by the creation of national resolution funds. In each country, a bank levy would be set in place, to feed ex ante into these funds and not the national budget, because "a European fund is unrealistic", Mr Barnier said. Referring to the example of the German and Swedish initiatives underway, he favoured "liabilities, commitments, anywhere there are risks" as a future tax base. So that this bank levy can be calibrated as fairly as possible, the Commission will take account of other reforms underway, such as those aiming to increase capital requirements ("Bâle III" directive). Mr Barnier also said that he was "prepared to find synergies with mechanisms such as the deposit guarantee systems". These national systems, for which the European rules are currently being revised, aimed principally to ensure the savings of natural persons (up to 100,000 euros by the end of 2010). Some Member States have also granted them competencies in a financial crisis management issues.
The European Banking Federation, which supports the Commission's approach, has stated in a press release that "exposed banks should be allowed to fail, if the worst comes to the worst" without making the tax payers bail them out. It greatly anticipates the impact assessment which will determine the size of the resolution funds and how they work. (M.B./trans.fl)