Brussels, 15/06/2016 (Agence Europe) - On Tuesday 14 June, the Dutch Presidency of the Council of the EU presented the member states with a minimalist roadmap on the work to be carried out European level to complete Banking Union in the Eurozone.
The three-page draft conclusions, of which EUROPE has had sight, is based on a progress report of the Dutch Presidency summing up the work carried out at technical level in parallel on the European deposit insurance scheme (EDIS) and on the reduction of financial risks (see EUROPE 11565). It lists a number of legislative actions already considered and it still leaves a considerable amount of leeway to the finance ministers, who will be called upon to approve it at the Ecofin Council to be held in Luxembourg on Friday 17 June. No deadline which is binding on the Council to finalise Banking Union has been specified at this stage.
The ambassadors of the member states to the EU (Coreper) discussed this roadmap on Wednesday 15 June. “It's a shambles! We are a long way from agreement”, a source who attended the discussions told us. The source added that it was impossible to predict a result at Friday's Ecofin Council.
According to the draft text, the European Commission would be called upon to present, by the end of 2016 the latest, the following legislative proposals: - the integration into EU law of the TLAC standard of the G20 laying down minimum own-funds requirements for systemic banks; - the harmonisation of certain national options and discretions laid down in the banking prudential rules ('CRR/CRD IV') and the introduction of a leverage ratio, “possibly set higher than 3% for systemic banks”; - a minimum harmonisation of the national solvency regimes in order to reduce the future level of non-performing bank loans;- the harmonisation of the rules requiring a temporary moratorium (moratorium tool) on the repayment of certain debts, before and, possibly, after a bank default.
At the moment, financial institutions holding sovereign debt are considered by the European legislation to be without risk. This subject is highly controversial: Germany and the Netherlands referred to the sovereign debt crisis in the eurozone and want the sovereign risk no longer to be zero by adjusting the exposure of the banks to government debt and/or the weighting of the sovereign risk. In the opposite corner, Italy fears that reducing this risk may have an impact on liquidity and the servicing of its government debt. The roadmap does not take position, going no further than to postpone such an examination until 2018 on the basis of the work carried out in the meantime at international level in the Basel Committee.
On the sharing of financial risks, the roadmap reiterates the commitment of the Eurozone countries to create a backstop for the Single Resolution Fund (SRF), the financial arm of the 'resolution' plank of banking union. This work will start once the European law on bank resolution and recovery ('BRRD') and harmonising the deposit guarantee schemes ('DGS') have been fully transposed in the EU. Furthermore, the roadmap at this stage simply states that the work on the EDIS proposal, which aims to create the third plank of banking union (see EUROPE 11437), will continue. On this point, the ministers will be called upon to provide orientations on: - a possible date for a political agreement; - the transitional build-up period of the European deposit insurance scheme; existing links between this dossier and the one on risk reduction. (Original version in French by Mathieu Bion)