Brussels, 08/12/2015 (Agence Europe) - On Tuesday 8 December, the European finance ministers finalised the details for the bridge financing which will give the Single Resolution Fund (SRF) an envelope of €55 billion for the entire period of its build-up, between 2016 and 2023.
In line with a political agreement of December 2013, the countries participating in banking union (so far, the 19 countries of the Eurozone: Ed) “agree to put in place a system of bridge financing arrangements in order to ensure sufficient funding to the SRF during the transitional period” of the fund, states the declaration adopted by the 28 ministers (see EUROPE 11428 and 11426).
National credit lines, of a maximum aggregate amount of €55 billion (1% of the deposits covered), will be used to guarantee the national compartments of the single resolution fund. They will be drawn on only “as a last resort”, when all other options have been exhausted, such as the bail-in requirements aiming to minimise the public cost of bank failure and protect the borrowing capacity of the SRF on the markets.
A group of countries, including Germany, Austria and the Netherlands, managed to ensure that the national approval procedures validate requests for the mobilisation of the national credit lines made by the Single Resolution Board, the European authority responsible for managing the SRF fund. To the satisfaction of France and Luxembourg, payments may be staggered over time. “Although we would have preferred full and prior commitments of all member states on the credit lines, we are confident that the agreement reached is solid enough to allow us to act quickly if needs be”, the chair of the SRB, Elke König, said in a press release.
The single resolution fund, the financial arm of banking union, will be fully up and running from 2016, as enough eurozone countries ratified the inter-governmental agreement (IGA) on which the fund is partly based ahead of time. Only Luxembourg has not yet ratified the IGA.
Backstop. The ministers reiterated their commitment to set in place a backstop for the SRA fund, “at the latest” at the end of the fund's build-up period. Progress will be evaluated “soon after the SRF enters into force”, they stress, but fall short of undertaking to reach an agreement before the end of 2023. Lastly, they state that in 2016, they will reflect on “measures needed to continue deepening the banking union”. (Original version in French by Mathieu Bion)