Brussels, 12/03/2014 (Agence Europe) - Representatives of the European Parliament and member states are trying to find common ground on the draft legislation to introduce a bank resolution mechanism (SRM) in the eurozone, and were in talks in Strasbourg on this subject as we went to press on Wednesday 12 March.
Before the trilogue meeting, experts were pessimistic about the likelihood of an inter-institutional agreement being reached. New talks have already been scheduled for Wednesday 19 March, ahead of the European summit. The convening of a special ECOFIN Council in the meantime will depend on the size of the gap between the two European institutions.
After more than three hours of talks on Wednesday, the chances of agreement being reached did not change much. An expert from the Parliament said that there had been movement, but there was still plenty more to be done. A Commission spokesperson said he had not been trained in crystal ball gazing, but would not bet much money on agreement being reached.
The member states are not willing to adjust the agreement in principle they reached in December, and the Parliament had therefore decided to play its hand as co-legislator by fighting for its own idea of what an effective SRM should look like. Sylvie Goulard (ALDE, France) said by email on Tuesday that the Parliament was prepared to compromise, but that ministers should admit that their negotiating position is simply the starting position. Her email swept aside so-called rumours that the Parliament would agree to all the Council's ideas en masse. Ratcheting up the tension, the European Central Bank's Yves Mersch is reported in Reuters as saying that the lack of an SRM would mean “suicide” for the eurozone.
On Tuesday, the ECOFIN Council finally granted the Greek Presidency a revised negotiating mandate (see EUROPE 11036). The member states have agreed to the Council having fewer powers over governance of the SRM. The Council would now only be allowed to reject (by a simple majority vote) the resolution process for a failed bank submitted for final approval by the resolution board (of representatives of national bank resolution authorities). If it rejected a process, then the board would have to re-write the resolution process, but the Parliament says it is the Commission that should have the job of giving the go-ahead for bank resolutions.
The MEPs say that only the ECB should be able to decide when a bank has collapsed, but the Council of Ministers wants the resolution board to have this power too. “However, on the issue of 'who pushes the button', the Council decided not to change the balance of roles between the Council and Commission, on which it had agreed on 18 December 2013, thus rejecting one of the key demands of the European Parliament and maintaining a text on which the Commission continues to have a formal legal reserve”, said EU Internal Market Commissioner Michel Barnier on Tuesday evening.
On the division of labour between the resolution board's plenary and executive sittings (the latter being only the national bodies concerned by the resolution in question), the member states refuse to agree to increase the thresholds at which the board's plenary would have the power to decide that a particular bank is to be wound up. The thresholds will depend on how much cash is in the resolution fund (SRF) in the sense of whether the transition phase is still under way or whether the fund has been fully pooled, and the type of aid in question (liquidity support or own resource aid). When the plenary sitting is convened, the decision-making process will depend on how much of the fund has been set up and whether the requested cash is to be provided from the money already collected or borrowed from the money markets. Barnier said the division of labour between the plenary and executive sittings had been “clarified”.
The member states say the SRF (which will eventually have €55 billion in its coffers) will be based on an intergovernmental agreement, but the Parliament is not happy about this. The financial industry's contributions to the fund would be transferred into national compartments which would then be gradually pooled (mutualised) over a ten-year transition period. In order to respond to criticism from the Parliament about a process over which they do not have any power, the speed of mutualisation and capitalisation of the SRF may be accelerated and take place over a period of eight years. Mutualisation may take place at a faster rate in the first few years, but Germany is not at all happy about the idea of mutualisation and capitalisation taking place at different speeds. (MB)