On Tuesday 15 July in the European Parliament, the Chair of the Single Resolution Board (SRB), Dominique Laboureix, described as a “very good step in the right direction” the provisional agreement on the ‘CMDI’ package aimed at strengthening the management of a bank crisis, which was approved at the end of June by representatives of the European Parliament and the Council of the European Union (see EUROPE 13668/10).
Pressed for more details by Jonás Fernández (S&D, Spanish) and Kira Peter-Hansen (Greens/EFA, Danish), Mr Laboureix said that the agreement would “increase the capacity to act” meaning that of the SRB, the European authority responsible for resolving large failing banks within the banking union, and would “make life easier” for it, particularly in terms of sharing tasks with the ECB, acting as single banking supervisor. Hence the importance, in his view, of finalising the agreement and “implementing it as soon as possible”.
Referring to the liquidation of Italian banks in 2017, which mobilised public money (see EUROPE 11816/10), he explained that the future rules will now make it possible to manage similar cases by opting for resolution and calling, under certain conditions, on national bank deposit guarantee schemes to help finance the internal loss-absorption capacity (‘bail-in’) required before calling on the ‘Single Resolution Fund’ (SRF), the budgetary instrument of the ‘resolution’ strand in the banking union.
Mr Laboureix did not specify the number of additional banks that would fall within the scope of a possible resolution in the event of failure, but he was in favour of maintaining the regulatory principle of ‘bankruptcy first, unless the public interest justifies resolution’.
“This approach works”, he believes. But any new bank designated as resolvable will have to be prepared, he warned.
Of the more than 2,500 banks operating in the EU, 100 banking groups fall within the scope of the SRB and just under 70 regional banks can be designated as resolvable.
“Resolution is still an exceptional treatment”, noted Mr Laboureix.
Luděk Niedermayer (EPP, Czech) asked what tools were missing to complete the banking union. In addition to setting up the European Deposit Insurance Scheme (EDIS), Mr Laboureix advocated removing barriers to the internal banking market by reducing national options. He hoped that the European legislator would look again at the issue of “liquidity in the resolution phase”. And he questioned whether the ‘toolbox’ available to supervisors remained adequate for emerging risks, such as “cyber attacks” that could corrupt the data needed for decision-making.
Instead of waiting for Italy to ratify the reform of the European Stability Mechanism (ESM), which would turn the ESM into a safety net for the SRF, couldn’t the SRB raise capital itself? - asked Jonás Fernández.
“No”, replied Mr Laboureix, citing two reasons: the SRB would have a lower financial rating than the ESM, which is financed by euro area countries, and its debt capacity would be much lower than that of the ESM. (Original version in French by Mathieu Bion)