Brussels, 10/03/2014 (Agence Europe) - On Tuesday, the ECOFIN Council will be looking at the draft regulation to introduce a bank resolution scheme (SRM) as part of the plan to introduce banking union within the eurozone. The aim is to decide on a new negotiating mandate for the Greek Presidency to use in fresh talks with the European Parliament on Wednesday.
Three months after the ECOFIN Council and the European Parliament decided on their negotiating positions for the SRM, the inter-institutional talks that began in January have produced nothing tangible to date so there is little likelihood of a speedy agreement between the two co-legislative institutions. The clock is ticking however, because if agreement is not reached this month, then the Parliament would not be able to endorse an agreement at its last plenary in April before the European elections in May.
The Parliament is pulling out the stops to defend the Community method and did not take long to demand that the ministers change their negotiating position at a special ECOFIN Council. The special council has never taken place. In plenary, the Parliament has confirmed its negotiating position in order to give its greater weight in the talks, but has found itself up against a brick wall.
The Council is intransigently sticking to its initial negotiating mandate, foreseeing the introducing of an intergovernmental agreement to decide on the legal basis of the €55 billion single resolution fund (SRF) to be financed by the financial industry and divided into national compartments that would later be gradually pooled over a period of up to a decade. Since the start of the talks, the Parliament has been challenging the legal arguments put forward by Germany to justify the intergovernmental, compartmentalised approach. The IGC talks have made progress, however, and are expected to be concluded on Monday evening.
In Brussels on Monday 10 March, the head of the Eurogroup, Jeroen Dijsselbloem, said: “The Parliament has to realise that for some member states, it is very important to have some elements in an IGA for example, including the start and the filling of the fund.” “If we design the mechanism the way that European finance ministers have agreed, then its foundations will be legally sound (…) We are making sure that the structure is viable through a combination of Article 114 of the Treaty on the Functioning of the European Union and the inter-governmental agreement”, explains German finance minister Wolfgang Schäuble on the German finance ministry's website.
Mutualisation. One of the questions to be discussed by ministers on Monday is the speed of mutualisation. “I think the mutualisation issue will be one of the main issues”, along with the fund's borrowing capacity, said Irish finance minister Michael Noonan. One way of minimising the scope of the intergovernmental treaty and thus make a gesture towards the European Parliament would be to reduce the time period for the full mutualisation of the SRF. Four options have been looked at by member states' experts with varying time periods and speed of contribution from banks or a combination of the two. The EP says there is no need for national compartments, but that in order to compromise, it would be prepared to go along with a fund pooled over a period three years, with 50% of the SRF being mutualised in the first year.
The SRF would be allowed to borrow from the money markets or other sources, although at this stage, no details seem to have been decided upon as to how the borrowing is to be guaranteed.
On Tuesday, the ministers will decide on their negotiating positions vis-à-vis compromise proposals submitted to them by the Greek Presidency on six key questions about the SRM. The proposals aim to answer MEPs' concerns and strike a balance between the two EU institutions.
One of the areas of concern is about how the mechanism is to be governed. The Presidency suggests the Commission and Council could have the right to object to the winding up process drawn up by the board of national authorities, but the Council says this option could only be available for protecting the general interest.
“The board's decisions will take effect automatically after a short period of time, unless the Commission and the Council together request an amendment. Such a procedure may, admittedly, look complicated on paper. In practice, however, it is highly unlikely that the Commission and Council would agree on a change in the short period prescribed. For this reason, this kind of structure would mean that the board would in fact usually make definitive decisions - and this would be the best solution”, explained Schäuble.
Other issues raised by the Greek Presidency include the institution that would have the power to decide that a bank had failed (the ECB perhaps, as the eurozone's bank supervisory body?); the type of decisions to be taken by the resolution board plenary (the use of thresholds); and the voting system at the board's plenary sittings. (MB)