Brussels, 18/12/2013 (Agence Europe) - As we went to press on Wednesday 18 December EU finance ministers were still in negotiation over the outstanding issues for the bank resolution mechanism (SRM), but hoped to reach agreement before the heads of state arrived in Brussels for the summit on Thursday.
The 18 eurozone finance ministers have agreed on the broad outline of the single resolution fund (SRF)'s backstop and, in the draft Eurogroup statement, they said they agreed to introduce a common backstop to be used as a last resort under the EU state aid rules.
During the ten-year transition period, while the SRF is built up to €55 billion, bridge financing will be available either from national sources backed by bank levies, “or from the ESM in line with agreed procedures”. The draft statement does not say whether this applies to direct recapitalisation of banks by the ESM, which would worsen a country's public debt, or a Spanish-style recapitalisation. The arrangements for the transition period would be operational as soon as the SRF is set up, “including the setting up of possibilities for lending between national compartments”, before the compartments are gradually pooled. The statement says that a common backstop will be developed during the transition period and “such a backstop will facilitate borrowings by the SRF. The banking sector will ultimately be liable for repayment by means of levies in all participating member states, including ex post”. It is not clear what bodies the SRF could lend to, be it a public body or the private sector. The common backstop must be fully operational after the ten-year transition period. The arrangements must be “fiscally neutral” and ensure equal treatment for all particpating member staes, including those that join the system at a later date.
Italy clarifies its position. Italy's finance minister, Fabrizio Saccomanni, has followed the German finance minister's move, sending a letter to the Lithuanian Presidency of the Council of the EU and the French, German, Dutch and Spanish finance ministers, to clarify Italy's position on the SRM. In a letter dated 13 December and published by the Wall Street Journal, Saccomanni says a common backstop is needed throughout the transition period to “provide a contribution to the cost of the resolution without conditionality”.
The German finance minister's letter has been interpreted as a u-turn by Germany on the promises it made last week. Saccomanni says the bank resolution mechanism has to be able to take decisions rapidly: “The governance arrangements outlined so far should be further streamlined, rather than made more complicated”. (EL/transl.fl)