Brussels, 06/11/2015 (Agence Europe) - European finance ministers will attempt to solve two issues on Tuesday 1 November on bridge financing for the Single Resolution Fund (SRF) so that a formal agreement can be reached in December.
The financial arm of eurozone's Banking Union, the SRF is due to be able to help finance the restructuring or winding down of a big failing bank from 1 January 2016. Under a decision taken by the Ecofin Council in 2013, it will have an intervention capacity of €55 billion (corresponding to 1% of the covered bank deposits) through the build-up period of 2016 to 2023. Through contributions from their financial sector, eurozone nations will provide finance for national compartments in the SRF that will be gradually pooled during the transition period.
The Ecofin Council has already decided that the eurozone countries shall establish national credit lines in January 2016, the size of which will correspond to the breakdown of countries' contributions to the SRF (see EUROPE 11402). These credit lines will only be used as a last resort for bank resolution and will be neutral in terms of the medium-term budget, since any public intervention must be financed after the event by contributions from the country's banking sector.
We understand that on Tuesday, the ministers will be asked to set six guidelines on two outstanding issues. Based on their own legal system, some countries, Germany, Austria, Finland, the Netherlands, the Czech Republic and Romania, say that national approval procedures are required via the executive or parliament, to validate any request for the intervention of national credit lines made by the SRB (single resolution board), the European body managing the SRF (see EUROPE 11420). The SRB is concerned, however, that these national approval procedures, required within three days, would undermine the credibility of the SRB's bridge financing.
Some member states, including France and Luxembourg, have problems getting rapid access to capital and want to stagger payments so that a certain percentage (yet to be specified) of the required amount would be paid within four days of a request from the SRB, the remainder being provided at a later date. The SRB fears it will be difficult to get the required amounts honoured, arguing that there are already clauses to facilitate member states' treasury management.
On a different note, some countries are still calling for early talks (starting in early 2016), preferably involving the European Stability Mechanism (ESM, the eurozone's permanent bailout fund) on the backstop that the SRB is due to have. Germany is not keen on the ultimate idea of pooling bank risks and is opposing this. It requires fair rules, in other words that all member states apply the relevant EU legislation (directives harmonising bank resolution and savings guarantee systems). Any ESM involvement would require a change to the intergovernmental treaty that set up the ESM and seeking an equivalent solution for non-euro member states to ensure that their bank systems do not lose out. (Original version in French by Mathieu Bion)