Brussels, 15/11/2013 (Agence Europe) - On Friday 15 November, the Ecofin Council issued a statement on backstops and the current analysis of Europe's banks.
The statement lays down the order in which any bank recapitalisation required should take place if the current analysis of bank assets by the European Central Bank with the aid of the European Banking Authority (EBA) were to reveal capital shortfalls in European banks in the autumn of 2014.
The statement says that member states should ensure that banks have drawn up specific, ambitious restructuring strategies with financing for the private sector for such an eventuality.
If extra capital proves to be necessary, the following process will be used: - banks must first seek their own cash by selling assets, raising cash on the money markets and profit retention; - if this does not raise enough money, national bailout funds can provide aid under national bank resolution mechanisms; - and, as a last resort, funding may be requested from Europe, firstly the European Stability Mechanism (ESM), which would be able to provide conditional aid in the form of a loan to a eurozone country whose banks are struggling, and secondly the €60 billion direct recapitalisation system, the details of which have yet to be decided.
The Ecofin Council says that the injection of public funding into failed banks will be subject to EU state aid rules, which were revised this summer and introduce bail-in requirements that are not as strict as those laid down in the BRRD directive harmonising national bank resolution schemes (which is still being finalised). The injection of public funding to safeguard financial stability would be subject to special treatment under the Stability and Growth Pact so that it does not increase the public deficit. The Council of Ministers wants the European Commission to measure member states' progress in introducing backstops and report back regularly, starting in December 2013. (MB/transl.fl)