Brussels, 02/09/2013 (Agence Europe) - The European Central Bank (ECB) says that 2018 is too late for entry into force of the bail-in rules and the member states have been given too much room for manoeuvre under the agreement reached at the Ecofin Council in June on the draft directive harmonising bank resolution and bail-ins. The Ecofin said the new rules would come into force from January 2018 (see EUROPE 10876), but Yves Mersch of the ECB's executive board said at the Alpbach European Economic Forum in Austria that 2018 was too late. Initially, it was hoped to bring the rules into force in 2015 and he said that the extra three years risked generating “irregularities” within the single market.
For the first time in the EU, lenders and share-holders would see their investments raided to pay for the cost of bailing out a failed bank. The first investors to see their investments raided would be shareholders, followed by junior and senior bond-holders, and lastly savers with more than €100,000 (big companies first, then small companies and individuals). Like with the restructuring of the Cypriot banks, only savings of above €100,000 would be raided.
Member states are given the discretionary power to make a different choice of private investments to be raided depending on the type of bank and other circumstances. This would only apply in exceptional cases, such as fear of a run on the banks, and cannot apply until 8% of eligible deposits have been raided.
Mersch says the option of a member state deciding to exclude certain investments gives them too much power, far more than the ECB feels is reasonable. He says that, in order to ensure coherence across the single market, only two options for bank resolutions should be possible: either the national resolution authorities make decisions within very limited room for manoeuvre or a central resolution authority should take decisions with greater room for manoeuvre. He said that the current solution combining decentralisation of decision-making and wide room for manoeuvre was a mistake.
SRM. Mersch approves of the main elements of the plans to set up a bank resolution authority and fund under the current EU treaty (plans unveiled by the Commission in July), and the aim of getting the single resolution system up and running in January 2015 (see EUROPE 10885). He said it was important for the committee of national bank resolution authorities to have the power to take independent decisions on a qualified majority vote.
The ECB says that there is still room for improvement here, however, because only the resolution authority should have the power to trigger a bank resolution, and not the European Commission. The ECB does not want to be on the committee of national resolution authorities itself, or to have voting right on it. (MB/transl.fl)