Brussels, 21/10/2014 (Agence Europe) - On Tuesday 21 October, the European Commission proposed the methodology for calculating banks' contributions to the national resolution funds of the EU from 2015 and to the single resolution fund (SRF) for banks established in the Eurozone from 2016.
In the home straight of the negotiations (EUROPE 11177), the Commission has proposed a corrective mechanism to ensure that the banking sectors of certain countries (such as France and the Netherlands), which are marked by high levels of concentration and a higher level of deposits than the European average, do not end up having to bear unreasonably high levels of contributions when they come under the rules applicable in the framework of banking union.
Based on the gradual pooling rules of the amounts allocated to the national comparments of the SRF (40% in 2016, 60% in 2017), this mechanism will mean, for example, that in 2016, the banks of banking union countries will pay 60% of their contribution in accordance with the rules valid for the whole of the EU ('BRRD' directive) and 40% under those applicable exclusively to contributions to the SRF ('SRM' regulation). This interim phase will continue for eight years, a period laid down in the SRF to be fully endowed (1% of deposits covered, or €55 billion). In addition, the corrective mechanism provides for the single resolution board (SRB), which will manage the SRF, to give the banks of the countries in question the option to provide payment commitments instead of cash, if the amounts in question are easily available in an emergency and if this provision does not reduce the cash contributions to a level lower than those which would have been payable in application of the BRRD directive valid for the whole of the EU. The advantage for these banks is that the money committed remains in their accounts, although it is no longer entirely their own, one expert noted.
For medium-sized and large banks, the contribution collected from each banking entity will include a basic contribution related to size (total liabilities less own funds and deposits covered), which will be adjusted on the basis of the risk profile. These risks - balance sheet size (own funds, leverage ratio), sources of funding (liquidity ratio), level of interconnection, exposure to derivative products - may increase the basic contribution of a bank by up to 150%, or reduce it by a maximum of 20%. Belonging to an institutional protection scheme (IPS) will bring down the bank's contributions as well as net exposure to derivatives. Small banks (total liabilities less own funds and deposits covered below €30 million and total assets below €1 billion) will be covered by a special regime providing for the annual payment of fixed sums of between €1,000 and €50,000.
The Commission calculates that the distribution of the banks' contributions within the Eurozone will be as follows: 90% for large banks representing 85% of total assets, 9.7% for medium-sized banks (14% of total assets) and 0.3% for small banks (1% of total assets). However, the Commission declined to indicate the share of any national banking sector of contributions to the SRF, as the legislative process is still underway. (MB)