Brussels, 06/06/2013 (Agence Europe) - On Tuesday 4 June, the Irish Presidency of the EU Council of Ministers handed the member states a new draft compromise on the directive harmonising national bank restructuring systems, which includes the option of national schemes lending money to each other
The draft directive suggests setting up national schemes which can be used to bail out failing banks (see EUROPE 10849). Under the latest compromise drafted by the Irish Presidency, which this newsletter has seen, each national fund would have ten years following entry into force of the new rules (a further four years would be allowed for funds that have already been used) to have financing equivalent to 0.5% of savings held in all the banks in that country. The schemes would be funded by banks alone, the amount of cash to be paid in being calculated in terms of the risks entailed by specific banks. On an exceptional basis, contributions may also be required after a crisis to cover any shortfalls.
National funds would be allowed to borrow from banks and other third parties and would be allowed to borrow from similar funds in other member states, but only if the cash in the fund before the onset of the crisis is not enough to cover needs. A fund asked to lend to another may hold consultations and may require approval from the relevant ministry before making a decision. Factors like interest rates and repayment deadlines for the loans would be established by common agreement between the national funds. If a fund gets loans from a number of countries, then the terms of the loans must be identical.
In the event of resolution of a bank active in more than one member state, the restructuring plan drawn up under the aegis of the national bank authorities of the country where the bank is registered shall apply. The plan must state the loss for each affected part of the group, losses to be borne by each type of shareholder and lenders, the amount and type of contribution to be made by national resolution funds and the amount to be provided by national savings guarantee funds.
Bail-ins. On the bail-in question, the Irish Presidency has chosen a mixed approach with rules being harmonised but leaving a slight amount of wriggle room for states depending on the specific nature of the failed bank. A system is advanced whereby savers with more than €100,000 will see their accounts raided only after shareholders and unprotected lenders have been raided. Savers with less than €100,000 will be the last to have their deposits raided and they will always be covered by national savings guarantee systems. National authorities would be free to decide whether or not to include over-the-counter derivatives.
Member states will have to ensure that their bankruptcy laws are in line with the rules in the directive on the order in which deposits will be raided. Austria is keen for the systems to be compatible, but Italy is reported to have doubts. (MB/transl.fl)