Brussels, 23/04/2013 (Agence Europe) - Major political groups at the European Parliament are close to compromising on the draft EU legislation to harmonise bank bailout systems, although the European Parliament's economic and monetary affairs committee will not decide on its view on Wednesday, but on Monday 20 May (see EUROPE 10831).
On Tuesday 23 April, rapporteur Gunnar Hökmark (EPP, Sweden) said he was delighted that a solution had been found on all the important issues, although a little extra time was still needed. Philippe Lamberts (Greens/EFA, Belgium) told this newsletter it was a good sign and a broad agreement was in sight, but the powers of the European Banking Authority needed further discussion. The request for the vote to be postponed came from the S&D.
Holkmark said that what was happening in Cyprus must not be allowed to be repeated, hence the importance of ensuring legal clarity at EU level. He said the draft EU legislation must make a clearer distinction between a “bank in crisis and a crisis of the banking system that could lead to collapse of the banking system”. In the event of an isolated bankrupt bank, restructuring would raid private investments ahead of any other measures, whereas in the event of the danger of collapse of the banking system, the state would be expected to intervene along with private investors.
“Bail-ins.” The draft legislation will spread across the EU the use of bail-ins (raids on bank accounts) to cut the cost to taxpayers of bailing out a bank. Accounts would be raided in the following order: a) shareholders, b) junior bond holders, c) senior bond holders, d) savers with more than €100,000 in their accounts. The rapporteur says that raids on savers with more than €100,000 in their accounts would be kept to a minimum, but the S&D Group wants them to be totally protected, along with savers with less than €100,000 (the latter are protected by the EU savings guarantee system).
The date when the new rules would come into force is still up for grabs. The Commission suggests 2018, but Germany and other countries, along with the ECB, suggest 2015.
In the event of collapse of a bank that might cause a wider collapse of the banking system, accounts with more than €100,000 may not necessarily be raided because Lamberts says national banking authorities will be given the power to decide on this for themselves. They will have the right to exempt savings of more than €100,000 under strict conditions (the impact on financial stability and the overall cost of the bailout).
Hökmark says there must be clear rules on what state authorities can do. If a government take action, it must not set up an uneven playing field or issue state aid. In the interests of taxpayers, a government will be able to nationalise a bank if this would be in the long-term general interest.
The Commission suggests binding cooperation among national bailout systems, but the MEPs say this should be voluntary.
The rapporteur says that the draft legislation must be endorsed until the European Commission unveils plans to set up an independent bank bailout authority and an EU bank bailout fund (possibly in June). Failure to do so may make it impossible for the EP and Council of Ministers to complete the legislation before the end of the current European Parliament in the spring of 2014. (MB/transl.fl)