Brussels, 19/09/2013 (Agence Europe) - The Council of the EU's legal experts say that as suggested by the European Commission, Article 114 (concerning the single market) of the EU Treaty is, under certain conditions, the right legal basis for the single bank resolution mechanism (SRM).
The experts issued their opinion on Wednesday 11 September, two days before the ECOFIN Council in Vilnius (see EUROPE 10922). It raises the following questions: - Is Article 114 the right legal basis for setting up a bank resolution mechanism and fund?; - Does the Commission's proposal only apply to banks registered in a limited number of member states?
Recalling European Court of Justice case law on use of Article 114 in the Vodafone, Smoking Flavours and ENISA cases, the legal experts decided that the centralised procedure being considered for bank resolution, whereby the European Commission would endorse decisions prepared by a European committee of national authorities that has the status of an EU agency and legal personality (see EUROPE 10885) cannot be considered as an isolated regulatory measure in pursuit of an autonomous objective, but rather as a factor contributing to a process of harmonisation in the financial services domain, without which setting it up would have no sense. The experts say that the job of supervising banks and winding them up are two complementary aspects of the single bank market.
The experts point out, however, that if the SRM were to be based on the set-up for the single bank supervision mechanism (through which the European Central Bank, as European supervisory body, applies EU law as implemented under national legal systems), this would jeopardise the pursued objective of uniformity for bank resolution and compromise use of Article 114 as the legal basis for the draft single resolution system.
Single Resolution Fund. The Council's lawyers say that the contribution to be made by the financial industry before or after a crisis to the Single Resolution Fund can be seen as payment for an insurance service that would be provided for them in the event of their needing to be wound up. In this sense, the contributions cannot be seen as taxes, but rather as insurance premiums paid in exchange for a service, meaning that Article 114 is a good legal basis for their harmonisation based on the draft BRRD Directive approximating national bank resolution laws.
The experts add that a centralised resolution system would not be operational if it were not endorsed by a single financing system and the various different financing systems in the member states would distort uniform application of the bank resolution rules in the single market.
The experts note, however, that the mechanism must guarantee the budget sovereignty of the member states and Article 114 cannot be used to force member states to provide, directly or indirectly, additional contributions to the EU budget or that of European agencies beyond the current system of EU own resources.
The Council's legal experts are preparing another legal opinion on whether delegating powers to the single bank resolution committee is compatible with the European Treaty, in the light of the Meroni ruling. (MB/transl.fl)