Brussels, 16/12/2013 (Agence Europe) - EU finance ministers were on the starting blocks on Monday 16 December, with only three days left to reach agreement on the single resolution mechanism for banks. The Lithuanian Presidency is keen for agreement to be reached by the end of the year, as requested by EU heads of state, and prepared a draft compromise over the weekend on the financing of the single resolution mechanism, a compromise that was leaked online by Reuters. It was due to be secretly discussed in Berlin by Germany, France, Italy, Spain and the Netherlands, in talks attended by the European Commission and European Central Bank.
The document drafted by Lithuania says that during the first year of application of the agreement, the cost of winding up a failed bank would be fully borne by the national fund of the country where the bank is registered, meaning that each eurozone country would have to set up a national resolution fund, financed by its own banks to the tune of 0.1% of all the assets covered by the fund. This would gradually rise each year to 1% by the tenth year of the scheme. If the cash collected in the first year is not sufficient to cover the resolution costs for a bank, then the funds of other countries (up to 10% of their resources) could contribute. The duty for other funds to intervene would gradually rise over the first ten years, explains Reuters, as the duty of the country in question would gradually fall. During the second year, for example, the fund in the failed bank's country would have to contribute up to 90% of its resources and if this is not enough, other funds would be asked to provide up to 20% of their resources. If during the ten-year transition period, the accumulated funding from the various countries is not enough to cover a failed bank, then the country where the bank is based could require other banks in its country to pay more. As a last resort, the state would have to intervene to fill the funding gap, requesting money if necessary from the European Stability Mechanism, as Spain did recently. At the end of the ten-year transition period, the national funds would merge into a common European fund. Der Spiegel says that Berlin believes it will not need to ask its banks to contribute during the first few years to the single resolution mechanism because they have already been contributing since 2011.
The agreement is expected to take the form of an intergovernmental treaty by March 2014. The Lithuanian compromise says that decisions would be taken at the resolution board by qualified majority voting, rather than unanimously.
On Tuesday, the European Parliament's economic and monetary affairs committee will be examining the single resolution mechanism, for which Elisa Feirrera (S&D, Portugal) is the rapporteur. The eighteen eurozone nations will be meeting the same evening to discuss backstops and the intergovernmental treaty. On Wednesday evening, the EU28 finance ministers will try to reach agreement on the scheme before the start of the European Summit (19 and 20 December). Intense talks are expected well into the night. The Wall Street Journal reported at the weekend about a letter from German finance minister Wolfgang Schaüble on 12 December, viewed by some as a u-turn by Germany on some of the concessions it made last week as a deal seemed to be emerging (see EUROPE 10982). The backstop is the sticking point. Schaüble is calling for a review clause to decide in the future how and when to improve the mechanism and its backstop. (EL/transl.fl)