Brussels, 11/06/2015 (Agence Europe) - On Wednesday 10 June, the European Banking Authority (EBA) sent technical advice to the European Commission on the criteria and principles that will be used to determine the uniform level of contributions by banks in the participating EU Member States to the Single Resolution Fund (SRF), the financial arm of the eurozone's Banking Union.
The key objective of the technical advice is to ensure that the Single Resolution Fund has sufficient means to credibly support failing banks using its budget of around €55 billion, equivalent to at least 1% of the covered deposits of all banks in the eurozone at the end of the eight-year transition period that begins on 1 January 2016 (see EUROPE 11214).
The EBA recommends a uniform level of contributions during the eight-year build-up of the SRF but contributions may take into account pro-cyclical effects, and vary accordingly instead of being spread out evenly over the initial period. The EBA's technical advice recommends a number of indicators for determining the phase of the business cycle and the risk of pro-cyclical effects and specifies constraints for the variations of the contribution level.
The EBA also specifies the criteria for determining the contribution level after a significant amount of the fund has been used to support resolution measures and the Single Resolution Fund needs to be replenished. In this case, similar considerations as for the initial build-up of the fund apply. However, the process “may be speeded up quite significantly” to ensure that the target level is achieved as soon as possible. This may result in contributions of up to twice the amount of the contributions made in previous years.
The EBA's advice will feed into the European Commission's reflection on the drafting of implementation measures for EU Regulation 806/2014 establishing the SRF. (Mathieu Bion)