Brussels, 18/10/2013 (Agence Europe) - The European Summit will ask the ECOFIN Council to urgently prepare a European approach to backstops to fill bank capital gaps for which no private solutions are available.
Next year, in preparation for introduction of the bank supervision mechanism, the European Central Bank will assess bank balance sheets and this will be followed by bank stress tests by the European Banking Authority. A draft conclusions document for the European Summit on Thursday 24 and Friday 25 October seen by this newsletter (see EUROPE 10944) says the tests are crucial in the short-term to improve transparency, restore confidence and repair bank balance sheets where necessary, and also in the medium-term to ensure a smooth transition to Banking Union.
The European leaders note the urgency of countries taking part in the single bank supervision mechanism drawing up an in-depth European approach, including national backstops in preparation for the assessment of bank balance sheets, and call on their finance ministers to establish the approach as a matter of urgency and communicate it by the end of the year.
Noting the importance of Banking Union for consolidating the bank sector and breaking the connection between public debt and bank problems, Europe's leaders (in the conclusions document) give Eurogroup the target of drawing up guidelines later this year for direct bank recapitalisation from the European Stability Mechanism. In Luxembourg on Monday 14 and Tuesday 15 October, divisions emerged among the member states in this connection because Germany wants to restrict any direct bank recapitalisation by the ESM to the bare minimum (see EUROPE 10943).
For the resolution side of Banking Union, the European Summit will point out that the BRRD Directive harmonising national bank resolution schemes and the draft legislation introducing the single bank resolution mechanism must be adopted before the end of the current European Parliament in May 2014. (MB/transl.fl)