Brussels, 18/06/2013 (Agence Europe) - The talks at the Council of the EU on harmonising bank restructuring schemes are intensifying with a view to reaching broad agreement at the ECOFIN Council on Friday 21 June (see EUROPE 10863).
Member states recognise that the key to reaching ministerial agreement is striking a balance between three inter-dependent elements of the directive, namely the design of the bail-in tool, particularly the balance between harmonisation and flexibility; financing; and minimum bank capital requirements and eligible assets, explained the Irish Presidency in a document sent to the delegations ahead of sherpa meetings on Monday 17 June. Dublin says the three elements are closely inter-connected and form a restructuring pyramid, or resolution triangle. If any one of the elements changes, then the other two will have to be adjusted accordingly. For example, if more flexibility is granted in deciding on the list of creditors (share-holders, junior bondholders, savers with more than €100,000) to be raided in the event of restructuring, then this change will mean that greater national restructuring funds will be required and/or a requirement for each bank to have greater funding and eligible assets, explains the presidency.
On bail-ins, most member states back the Irish approach of restricting the option of excluding certain assets from the list. Some assets which cannot be raided in a short enough time frame, could be exempt from bail-in, up to a limit of 5% of the total value of assets in the same class under the national hierarchy decided upon for insolvent banks). Some countries want greater flexibility to ensure financial stability, while others want national restructuring funds to be used to supplement bail-ins. Bail-ins would become available in 2018.
Member states would be free to merge their own bank restructuring fund with their savings guarantee fund if they want. A national bank restructuring fund would have to be funded by the financial industry ahead of any crisis to the tune of 0.5% of savings covered (if the two funds are separate).
MREL (minimum requirements for own funds and eligible liabilities). It would be for each national authority to decide for itself on how much capital and bank assets could be raided depending on the level of risk taken. A number of countries (Finland, the United Kingdom and the Netherlands) call for harmonised rules at European level in this domain, although a majority of member states feel this would not be appropriate. The Irish Presidency suggests that the European Banking Authority (EBA) would issue recommendations by 2016 on a possible harmonisation of bank resolution schemes, after which the Commission could propose binding rules. This idea has been welcomed by the majority of delegations. (MB/transl.fl)