Luxembourg, 11/09/2015 (Agence Europe) - Three options are on the negotiating table for member states to provide enough finance to the Single Resolution Fund (SRF), the resolution arm of Banking Union in the eurozone as it is gradually built up from 2016 to 2023.
Under the inter-institutional agreement of 2013 setting up the Single Resolution Mechanism, a decision on bridge financing for the SRF is expected by the end of the year in order that its intervention capacity can reach €55 billion (1% of the covered bank deposits) during the build-up period (see EUROPE 11386).
“The Economic and Finance Committee has examined several options and progressively focused its work on 3 main ones: (i) national credit lines from Member States, (ii) national guarantees and (iii) an ESM direct credit line,” explains the chair of the EFC expert committee at the Council in a letter to Luxembourg's finance minister, Pierre Gramegna, on Monday 7 September. The Committee notes wide support for a direct credit line from the ESM to the SRF.
This latter option is backed by France but rejected by Germany and is the most able to prevent bank crises causing debt crises, but it would require a change to treaty setting up the permanent bailout fund for the eurozone (which would need to be ratified by countries like Germany that require such ratification) and it would require equal treatment for euro and non-euro countries. The EFC chair comments: “Overall, the ESM credit line option appears as a solution that cannot be implemented by the end of the year.”
At the meeting of eurozone finance minsters on Saturday 12 September, the politicians will be quizzed about their willingness to change the ESM treaty. “If not, the alternative could be to put in place for the transition period a system of national credit lines to the SRB and to work on a common backstop during the transition period. In this case, it needs to be decided whether the national credit lines would be individual, mutualised or progressively mutualised,” explains the EFC chair. (Mathieu Bion)