Meeting in an enlarged format in Luxembourg on Thursday 16 June, EU finance ministers failed to adopt a comprehensive work programme to complete the banking union in the euro area by 2030.
They decided to move forward on the ‘financial crisis management’ aspect, whereas the draft work programme submitted to them at the beginning of May by Eurogroup President Paschal Donohoe provided for three others: bank deposit guarantee schemes, deepening of the internal banking market (home/host rules) and diversification of exposure to sovereign debt (see EUROPE 12942/21).
We remain committed to completing the banking union and we must “seize every opportunity to strengthen it step by step”, said Mr Donohoe. He added: “This evening, we agreed that we will strengthen the common framework for bank crisis management and also for the rules governing the use of national deposit guarantee funds.”
In its statement, the Eurogroup details the elements of a reformed banking crisis management framework that could be adopted by the end of the current legislature: - a clarified and harmonised public interest assessment prior to any resolution of a failing bank; - a wider application of resolution tools at EU and national level, including for non-systemic banks, financed through ‘MREL’ capital and private sector-funded safety nets; - further harmonisation of national deposit guarantee funds (DGS), with the introduction of a harmonised ‘least-cost test’ to govern the use of these DGS funds; - the harmonisation of targeted features of national insolvency regimes.
While maintaining a level playing field, this banking crisis management framework “will take due account of the specificities of national banking sectors, in particular by preserving an operational framework for intra-group insurance schemes”, the Eurogroup stresses, as such schemes are widespread in countries such as Germany and Austria.
The decision to move forward only on ‘banking crisis management’ was prompted by the recent turmoil in sovereign debt markets and exacerbated by the ECB's announcements on raising key interest rates, an EU source said on Friday 17 June. Southern European countries considered it too risky to move forward on all aspects of the banking union, including the diversification of bank exposure to sovereign debt.
EU Commissioner for Economy Paolo Gentiloni has confirmed that the European Commission will develop specific legislative proposals to “increase the stability of the banking system, protect taxpayers and improve the confidence of savers”.
See Mr Donohoe’s draft work programme: https://aeur.eu/f/1G6
See the Eurogroup statement: https://aeur.eu/f/26f (Original version in French by Mathieu Bion)