On Friday 25 May, the European finance ministers will discuss the legislative package of November 2016 on reducing risks in the banking sector.
Following the discussions of the ambassadors of the member states to the EU (Coreper) on Tuesday 15 May, the sources EUROPE spoke to declined to be drawn on the likelihood of a political agreement in principle at the Ecofin Council at the end of this week.
An agreement is looking “difficult and ambitious”, one diplomatic source said, whilst another spoke of discussions “in jeopardy”.
Of the four matters still open (see EUROPE 12019), only one - albeit a major one - appears to be a problem. Already highlighted during the ministerial discussions of March this year (see EUROPE 11980), this is connected to the level of subordinated instruments that a resolution authority may require of a banking group of systemic importance (G-SII and 'top-tier banks') and that would be the first to be mobilised in the event of resolution.
Two options have been tabled by the Bulgarian Presidency of the Council of the EU. The first takes the view that the requirements laid down are maximum and gives the resolution authorities considerable margin. This is reported to be favoured by a group of countries (Cyprus, Croatia, Spain, France, Greece, Italy, Malta and Portugal), which make up a blocking minority.
The second option, which has the support of Germany and several countries of northern and central Europe, is more demanding, as it assumes, amongst other things, that the requirements laid down are minimum standards.
“The debate is polarised around the problem of 'home' and 'host' countries”, a diplomatic source summed up.
On the other hand, the temporary introduction of a reporting obligation to complete the current reform of the prudential rules aiming to cover the risks inherent to securities portfolios ('fundamental review of the trading book') is reported to have been resolved. Only France apparently still opposes the exemption from the prudential rules for 14 German development banks, but this is more for tactical reasons, certain observers consider.
Wednesday's Coreper will not reopen the dossier before the Ecofin Council has been held. A political agreement in principle on Friday could help to move forward discussions on the 'risk-sharing' plank of the work to complete Banking Union in the Eurozone, while important decisions in this area are hoped for at the Eurozone summit at the end of June. (Original version in French by Mathieu Bion)