On Wednesday 20 March, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) finalised its position on the ‘CMDI’ legislative package aimed at strengthening banking crisis management (see EUROPE 13367/8).
MEPs endorse the main objective of the legislative initiative to extend the scope of bank resolution to medium-sized banks, particularly those with a systematic impact at regional level, by mobilising national bank deposit guarantee schemes (DGSs) to provide bridge financing for bank resolution. This bridge financing would be authorised when an evaluation (least cost test), carried out by the competent authorities, demonstrates that such a solution would be less costly and more effective than bankruptcy proceedings.
All DGS schemes will have to set up a bridging finance mechanism, with “no special treatment” for the IPS systems set up in Germany and Austria, Pedro Marques (S&D, Portuguese), the European Parliament’s co-rapporteur on this dossier, told Agence Europe on Thursday 21 March. He stressed that there would be “no free pass to the banks”, which will have to demonstrate that they have been preparing for resolution, in particular by allocating ‘MREL’ capital needed for an internal bail-in.
“We have also made sure the banks that are smaller are not unnecessarily included in the scope”, added Luděk Niedermayer (EPP, Czech), another co-rapporteur, in a press release.
To facilitate the extension of the scope of bank resolution, MEPs approve the proposal to rationalise the hierarchy of creditors who would be affected in the event of a banking crisis. However, contrary to the European Commission’s initial idea of creating a single category of highly protected creditors (see EUROPE 13164/7), they advocate a two-tier priority system, under which the deposits of individuals and SMEs would benefit from better protection than those of large companies and public authorities. “Large companies have access to the necessary information”, said Mr Marques.
Bearing in mind the importance of completing the banking union, the parliamentary committee also advocates greater harmonisation and transparency in the interventions of the DGS schemes, which are responsible for reimbursing savers up to €100,000 in the event of bank failure. The rules have been clarified when a saver’s bank defaults when the saver is engaged in a particular financial transaction, such as a property sale. In this case, protection would be extended to sums between €500,000 and €2.5 million over a six-month period.
The parliamentary committee’s position will be forwarded to the plenary session at the end of April for confirmation. It will be up to the Parliament that emerges from the polls in June to begin interinstitutional negotiations with the EU Council, when the latter is ready. (Original version in French by Mathieu Bion)