Brussels, 06/11/2012 (Agence Europe) - On Tuesday 6 November 2012, MEPs on the European Parliament's economic and monetary affairs committee welcomed the draft report by Gunnar Hökmark (EPP, Sweden) on the resolution of failing banks. “There should be no banks that are too big to fail. Not only the profits but the losses must go to the owners. No other political groups disagree with that. We need stable legislation that can make it a reality”, explained Hökmark.
“Bail-in”. There are differences of opinion about bank bail-ins, explained Wolf Klinz (ADLE, Germany), but they will soon be ironed out. In its proposals published in June, the European Commission considered a range of bail-in options like recapitalising banks by writing down its shares, reducing debts on the bank and converting shares into assets, in order to get the failing bank's losses paid by the owners as far as possible (see EUROPE 10628). The differences of opinion are about the instruments eligible for bail-ins and the range of financial players that would buy the debt. Hökmark said the maturity of the eligible debt should not be less than six months, and Klinz said it should be limited to 5% of a bank's total non-weighted shares.
For bank resolutions, the draft Hökmark report introduces three new public intervention methods - the granting of public guarantees, the injection of funding by a state and the full nationalisation of a bank (see EUROPE 10720). Hokmark said that “three public intervention tools have been added - I am not leaning towards socialism. It is a way of clarifying when it is acceptable for the State to intervene and when not. When there are deep problems, sometimes the only way to regain credibility is to have some form of public intervention, but we need to avoid it as far as possible”. Referring to the bank crisis in Sweden in the 1990s, he said that bailouts should last for as little time as possible. On behalf of the Greens/EFA group, Philippe Lamberts of Belgium said he favoured this type of public intervention as long as it is not automatic in any way and is only used as a last resort.
The rapporteur stressed the importance of setting up and financing national bank bailout funds ahead of any crisis, arguing that cash becomes king in a crisis and it is not fair that prudent banks should be made to pay for banks that have taken too many risks. The desire to set up a single rule book at EU level was welcomed by Vicky Ford (CRE, UK). (MB/transl.fl)