EU finance ministers agreed in principle in Luxembourg on Friday 16 June on two items of draft legislation in the banking domain.
Firstly, a draft directive introduced a new category of bank holdings to be tapped into for the bail-in of a failing bank (see EUROPE 11803). Secondly, a draft regulation gradually introduces (over the space of five years) bank capital requirements relating to the application of international financial standard IFRS 9.
“These proposals set out to help make our banks more resilient to shocks in the light of new prudential standards agreed at international level. We have decided to make these texts a priority and hope the Parliament will be able to start negotiating by the end of the year”, said Maltese minister Edward Scicluna after the Ecofin Council. The two items of legislation are part of a package of draft legislation on reducing financial risks, unveiled in November 2016 (see EUROPE 11674).
EU Financial Services Commissioner Valdis Dombrovskis said the proposal on bank creditor hierarchy, which amends the BRRD directive on bank wind-downs, would give useful “greater clarity” to investors.
The review of the BRRD directive creates a new category of senior debt that can be turned into shared in the event of the bail-in of a failed bank in order to allow banks to raise this type of debt on the markets while in a low-interest environment. Action was also required to ensure fair rules since Germany, France and Italy have already introduced legislation in this domain.
The agreement in principle on the two items of legislation had been conditional on stabilisation of the report by the Maltese Presidency of the Council of the EU on work in progress on the reduction and sharing of financial risks. (Original version in French by Mathieu Bion)