Brussels, 29/04/2016 (Agence Europe) - The deposit guarantee and bank resolution functions are “two sides of the same coin”, the Chairman of the US Federal Deposit Insurance Corporation (FDIC), Martin J. Gruenberg, said in Brussels on Friday 29 April, at a conference organised by the Single Resolution Board (SRB).
Gruenberg stressed that the money earmarked to protect bank deposits is often used to pay for some of the costs for the recovery and restructuring of a failing bank, for instance to maintain essential banking activities such as payment services. He said that entrusting both functions - deposit protection and bank resolution - to “the same entity” makes sense.
The proposed regulation instituting the European Deposit Insurance Scheme (EDIS) gives the SRB board the responsibility for the Single Resolution Fund (SRF), the financial arm of the 'resolution' plank of Banking Union in the Eurozone, and for the future European Deposit Insurance Scheme (see EUROPE 11437). Between now and 2024, the SRF fund will have €55 billion (by June, it will already have more than €10 billion) and the Deposit Insurance Scheme €43 billion.
The work of the Council of the EU on the 'deposit guarantee' plank is not moving forward with the same sense of urgency as when the 'resolution' plank of Banking Union was being put together. The Dutch Presidency hopes to produce a roadmap on work to be carried out simultaneously on the sharing (e.g. EDIS proposal) and reducing (e.g. exposure to sovereign risk) of risks in the banking sector.
Backstop. “We also have to provide a credible backstop for the single resolution mechanism. The ministers undertook to do this in 2013”, the Commissioner for Financial Services, Jonathan Hill, stressed in a video message which was transmitted during the conference. He welcomes the fact that at their informal meeting in Amsterdam, the European finance ministers expressed “broad support” for launching work on this backstop as soon as the last three member states to do so (Belgium, Poland and Slovenia) have transposed the 'BRRD' Directive governing the bank resolution regimes (see EUROPE 11538). France and Italy want the European Stability Mechanism (ESM), the permanent bailout fund of the Eurozone, to play a part in this. Germany has rejected a suggestion.
“We need a backstop as soon as possible, via an ESM credit line if possible”, said the President of the 'economic and monetary affairs' committee of the European Parliament, Roberto Gualtieri.
MREL. As well as preparing the resolution plans for some 40 systemic banks, the SRB Board is currently laying down minimum requirements for own funds (MREL) for the banking groups directly under the supervision of the ECB and for cross-border banks (see EUROPE 11473). For the systemic banks, these requirements will take account of the 'TLAC' standard agreed on by the countries of the G20, even though these will apply before then.
According to Joanne Kellermann, a permanent member of the SRB Board, banks want to get an idea of the MREL instrument in quantitative (at least 8% of total assets) and quantitative terms and regarding the transition period which will apply for them to come into line with its requirements. “We are in the process of collecting data from banks”, she said. Her colleague Dominique Laboureix stress the importance of taking greater account of the “gap” between the MREL laid down for a given bank and the starting situation of that bank. “It will be a long adventure”, concluded Elke König, the chair of the SRB Board, who added that the maximum period of “four years” proposed by the European Banking Authority appears “appropriate”. (Original version in French by Mathieu Bion)