The French Presidency of the Council of the European Union and representatives of the European Parliament reached a provisional inter-institutional agreement in trilogue on Thursday 28 April on the proposed ‘Daisy Chain’ regulation revising the rules for the resolution of large failing banking groups. This legislative revision provides for targeted adjustments that will help improve the solvency of banks.
The co-legislators managed to find a compromise from their original negotiating position (see EUROPE 12883/18 and 12859/7).
The first point concerns the deduction regime for own funds and eligible liabilities meeting the requirements for loss-absorption in resolution (MREL) that are channelled through an intermediate entity, nicknamed ‘daisy chains’. The provisional agreement provides for a revised deduction regime designed to avoid in particular double-counting of MREL elements at the level of intermediate entities, in the event of banking resolution. A carefully framed review clause has been added.
The second point concerns the treatment of groups with a multiple-point-of-entry resolution strategy (MPE groups), as opposed to a single-point-of-entry (SPE) resolution strategy. Negotiators agreed on a transitional regime until the end of 2024 for MPE groups, subject to an assessment by EU resolution authorities.
“I welcome the successes of the European Parliament in the negotiations for the new rules on capital requirements according to the so-called ‘Daisy Chain’ proposal. Firstly, we take due account of European specificities such as financial holding group structures. Secondly, we preserve financial stability if banking groups are concerned that are systemically relevant on a global scale and have subsidiaries in third countries”, said shadow rapporteur Othmar Karas (EPP, Austria) in a statement.
The provisional agreement still needs to be formally approved by the EU Council and the Parliament. (Original version in French by Anne Damiani)