Brussels, 07/11/2013 (Agence Europe) - In the afternoon of Thursday 7 November, member states' representatives on Coreper had the opportunity to assess the balance of power at the Council of the EU on the resolution aspect of banking union a week ahead of the Ecofin Council that will discuss the matter.
Germany seems to be isolated on two key aspects of the proposal to introduce a bank resolution system, namely the scope of application of the resolution scheme and the EU institution that will be responsible for endorsing draft decisions submitted to it by the single resolution committee of national competent bodies.
In July, the European Commission suggested that all banks in the eurozone should be covered by the resolution mechanism (see EUROPE 10885). Germany challenges the scope of the resolution system, which is says is too broad and should be aligned with the single bank supervision system that will see 130 big eurozone banks supervised by the European Central Bank directly in the autumn of 2014. Before the Coreper meeting, a diplomat said that a clear majority of countries wanted to keep the Commission's suggested scope of application. Another national expert said that the vast majority of countries, apart from just one with a very small partner country were in favour of the system applying as broadly as possible. Arguing that the limited scope would not cover a number of cross-border banks, the Commission is sticking to its guns, although EU Internal Market Commissioner Michel Barnier recently said he was prepared to compromise with the biggest economy in the eurozone.
German Finance Minister Wolfgang Schäuble still wants the Council of the EU to be given the power to endorse the draft decisions made by the future bank resolution committee. The Commission suggests that it should do this itself. Again, Berlin seems to be isolated. A national expert said that here too, everyone agrees, apart from one member state, and a clear majority back the initial proposals.
The most recent Lithuanian Presidency compromise on the draft legislation, dated 4 November (see Twitter @AgencEurope), backs the majority view.
The 4 November draft compromise amends the composition of the single resolution committee. Along with representatives of national authorities, the committee would have a chair and three “qualified individuals” working full-time. The Commission would not be represented on the committee and the ECB would simply be a permanent observer.
Squabbling over voting rights. The decision-making process at the single resolution committee is another area of controversy for host countries whose banks are owned by foreign cross-border banking groups. The Commission suggests an even balance of power between home countries (one vote) and all the host countries (one vote). The Lithuanian Presidency says any decision on the resolution process for a bank should be made by consensus. If that proves impossible, then the chair and the three qualified individuals should decide by a simple majority, each of them having one vote.
Most countries support this at the technical level, but a number of countries, like France, have called for an alternative solution. Paris says that, in the event of the resolution of a bank, any country asked to contribute financially should be able to have its say. France says the decision-making power of the committee chair and three qualified individuals should be equivalent to the home and host countries combined.
The question of creating a single bank resolution fund or a chain of national bank resolution funds is another bone of contention among the member states.
The Lithuanian Presidency's draft compromise strengthens the operational separation at the Commission between work on bank resolution and analysis of state aid rules when public money is mustered for winding up a bank. A diplomat said there was now a stronger Chinese wall between the two types of work. The idea has been mooted of allowing appeals to be made against decisions by the resolution committee by any corporate body that feels it has been damaged. (MB/transl.fl)