On the evening of Wednesday 25 October, the representatives of the European Parliament and Council of the EU reached a political agreement on two legislative proposals of the 'Banking risk reduction' legislative package: - the proposed directive on the hierarchy of contributing creditors in the event of banking resolution, and; - the proposed regulation on the application of international accounting standard IFRS9.
Presented by the Commission in late November 2016 (see EUROPE 11674), this package is considered the most ambitious of the institution's current mandate in the banking sector. The Parliament and Council had decided to withdraw these provisions from the rest of the package and adopt them under a fast-track procedure.
In June this year, the Maltese Presidency of the Council succeeded in reaching a political agreement of the member states on both proposals (see EUROPE 11810). For its part, the Parliament adopted its position on the IFRS9 standard in July (see EUROPE 11827) and its position on the hierarchy of creditors in October (see EUROPE 11800).
“Today's agreements are the first deliverables of the banking risk reduction package”, said European Financial Services Commissioner Valdis Dombrovskis, adding that they retain the principal elements of Commission's initial proposal.
The institutions have agreed on introducing a new category of assets, of senior but non-preferential bank credits. According to the Commission, this will make it easier for the banks to comply with the international prudential standards (TLAC), applicable from 2019 onwards.
The co-legislators have also agreed on an interim period of five years from January 2018 in the application of the revised IFRS9 standard. The aim is to limit the negative impact of the new standard on banks resulting from an increase in losses anticipated in the credit portfolio, leading to a reduction in ratios of callable capital. Furthermore, the agreement provides for a new interim period for the application of the prudential rules on the limits applicable to major risks.
The agreement must be approved by the Council and the plenary session of the Parliament. (Original version in French by Marion Fontana)