Brussels, 23/09/2014 (Agence Europe) - The mutual guarantee schemes (institutional protection schemes, IPS) used by certain German (Landensbanken) and Austrian banks will be taken into account to reduce the level of contribution of these banks to the bank resolution funds.
For the banks which are not considered small entities, the financial contributions to the resolution funds will include a base contribution linked to size-related risks. This basic contribution will be calculated on the total level of liabilities from which own funds and covered deposits, two elements which, by definition, reduce the risk, will be subtracted. “When calculating the base contribution, the total liabilities will not include receivables generated by an institution which is a member of an IPS mechanism”, according to a Commission document of which EUROPE has had sight and which will be used as a basis for the discussions of the expert group on banking contributions, which meets in Brussels this Thursday.
In the event of a systemic crisis, an IPS mechanism does indeed constitute a crisis “vector”, Olivier Guersent, Deputy Director General for the Single Market, told the committee on economic and monetary affairs of the European Parliament on Tuesday 23 September. However, given the diversity of the mechanisms which exist within the EU, he continued, the idea is to grant a bank which is a member of an IPS mechanism some level of compensation if its economic model is low-risk, a premium which the future Single Resolution Board will be able to withdraw if it believes that the bank in question is taking too many risks, particularly on the derivatives markets.
“The Commission has taken a step in our direction. This will allow a swift conclusion” of the negotiations, said Markus Ferber (EPP, Germany).
The Commission is soon to present its draft implementing measures, one for the banks' contributions to the national resolution funds (under the 'BRRD' directive) and the other for the contribution of the eurozone banks to the Single Resolution Fund (SRF). The aim is for both texts to be adopted at the same time in October, but it is possible that the Council's implementing acts stemming from the treaty instituting the SRF will not be adopted until November, the Commissioner for the Single Market, Michel Barnier, announced the day before, in his final speech before the MEPs. The two draft delegated acts will be either accepted or rejected as a package by the Parliament and the member states.
Proportionality. Gunnar Hökmark (EPP, Sweden), rapporteur on the “BRRD” directive, stressed the need for the principle of “proportionality” to be respected. He is one of a group of MEPs who called on the Commission to ensure that the “risk” factor, which will allow the base contribution of a bank to the resolution fund to be increased or decreased, to better reflect the risk profiles of the financial institutions in question (see EUROPE 11151).
The Commission is standing by its assessment: the contribution of a bank which takes considerable risks will be capped at 150% of its base contribution. According to our assessments, increasing the adjustment range of the contribution compared to risks would most affect the level of contributions of “medium-sized banks”, as a result of the wide range of models which exist on this sector of the market, and would have little impact on the contributions of major banks, Guersent explained.
A second Commission document states that the major banks representing 85% of total bank assets of the eurozone will pay “at least 90% of total contributions”. “In fact, the introduction of additional risk indicators would likely increase this share”, the document notes. It goes on to read: “more than 50% of banks will be under the small bank regime, benefiting from an average reduction of 70% in the euro area” (our translation throughout). (MB)