Brussels, 10/04/2014 (Agence Europe) - The BRRD directive to harmonise national bank resolution schemes will not be amended to introduce exemptions to the bail-in rules for some types of aid that central banks may grant struggling banks.
A Council of the EU source said on Wednesday 9 April that the United Kingdom has withdrawn its request for exemptions. Commenting on this, Sven Giegold MEP (Greens/EFA, Germany) says that the member states were unable to agree on the matter and there had not been anything on it so he assumed that nothing was going to change. Communication between the European Parliament and the Council of Ministers takes place by email without any official consultation of the Parliament's economic and monetary affairs committee.
The BRRD directive will therefore be formalised in its current state by the EP plenary on Tuesday 15 April at the same time as the bank resolution mechanism (SRM). The former generalises the idea of bail-in throughout the European Union, whereby from 2016 onwards bank shareholders and lenders will be the first to have to contribute to the cost of winding up a failing bank. The aim is to avoid the need for taxpayers to bail out the bank.
Under the BRRD directive, bail-ins will apply when banks have received special state aid, apart from preventative recapitalisation (Article 51). The disagreements are over two other criteria which would allow a bank that has received public funding to be exempt from bail-ins. The criteria are listed in a different provision of the directive that allow a bank that has received state aid to not be considered failing or likely to fail (and therefore not to be subject to the resolution procedures (Article 27)).
The United Kingdom wanted to be able to exempt a bank when the state aid is in the form of a public guarantee for the granting of liquidity by the central bank, and the European Parliament seemed to support this, but Sylvie Goulard (ALDE, France) warned that this would require re-negotiations of SRM, thus opening a Pandora's Box that would have led to other member states making their own demands. France and Italy were arguing for exemptions to also be granted when state aid allows banks to attract more investors when issuing bonds on the market, which the EP did not look like it would go along with.
A European source astonished at the hard lobbying from the UK on the chair of the European Parliament's economic and monetary affairs committee, Sharon Bowles, said this slight change would have had a huge impact in practice. (MB)