Luxembourg, 17/06/2016 (Agence Europe) - The countries of the Eurozone have not set any date for the European deposit insurance scheme (EDIS), the third and final pillar of banking union in the Eurozone, to be in place.
It has not been possible to set a final date to complete banking union, but “our ambition is to reach an agreement in the course of the interim period” during which the single resolution fund (SRF) will be built up, the Dutch finance minister, Jeroen Dijsselbloem, said on Friday 17 June.
In the draft conclusions it adopted, the Ecofin Council states that it intends to pursue the technical level work on EDIS. The ministers will negotiate the proposed regulation “as soon as constructive work at technical level has been carried out on the measures aiming to reduce the risks”. Dijsselbloem was unable to specify how this progress would be assessed, but he said that the sooner the legislative texts on reducing the financial risks are drafted, the greater the “appetite” of the member states will be for moving forward on EDIS.
Towards an inter-governmental agreement. As was also the case on the resolution plank of banking union, the Council is opening the door to the drafting of an inter-governmental agreement (IGA) as a basis for the non-harmonised provisions of the EDIS system. Germany once again got its way on rejecting the Community method, which puts the European Parliament out of the frame, at least during the build-up period of the future European deposit insurance scheme. The Commission has always taken the view that there was no need for an inter-governmental agreement.
Arguing that progress needs to be made in line with an “appropriate sequence” for the sharing and reduction of financial risks in the banking sector, the Council calls upon the European Commission to present the legislative proposals referred to in the roadmap of the Dutch Presidency of the Council of the EU by the end of 2016: bringing the G20's TLAC standard in at EU level, changing the banking prudential rules to harmonise the options and discretions available to the member states and implementing the leverage ratio, and harmonising the national insolvency regimes (see EUROPE 11573). One new element has been added: the Council is also asking for a “proposal on a common approach to the bank credit hierarchy to enhance legal certainty in case of resolution”, to hone the rules on the bail-in laid down in the bank recovery and resolution directive (BRRD).
Despite the insistence of the Dutch Presidency, the language calling upon the Council to assess the work on the treatment of the sovereign risk underway at the Basel Committee has been watered down, with the reference to the date of 2018 deleted. On this point, Germany gave ground.
Single resolution: work starts on backstop. France argued that it was more important to obtain guarantees on setting in place a backstop for the single resolution fund, the financial arm of the resolution plank of banking union. “We need to go much further on the backstop”, said the French finance minister, Michel Sapin. The Council reiterates its commitment to start work on this issue “in September 2016”, if the BRRD directive has been fully transposed. Additionally, once an agreement has been reached on the backstop, a decision may be made for the backstop to be up and running before 2024, the deadline for the SRF fund to be fully built up and pooled. France and Italy want this fund to have a credit line from the European stability mechanism (ESM), an idea which Germany opposes.
All of the delegations which took the floor during the debate - Germany, Spain and Italy - officially welcomed the “balanced” nature of the roadmap agreed upon on Friday. (Original in French by Mathieu Bion)