Göteborg, 02/10/2009 (Agence Europe) - Meeting in Gothenburg in Sweden on Thursday 1 October 2009, EU finance ministers and central bank governors examined current moves at EU level to reform the financial industry. They analysed research by the Committee of European Bank Supervisors (CEBS) (see separate article), approved the negotiating timetable for a political agreement to be reached at the December 2009 European Council and looked at how to improve cross-border crisis management in the wake of the collapse of financial institutions. Controversial politically due to its impact on member states' budgetary powers, the third issue was not discussed in any press conference. The safeguard clause negotiated by the United Kingdom at the European Council, whereby decisions by the EU's future microeconomic supervisory authorities shall not impinge on member states' budget sovereignty, will make it even more difficult to adopt binding EU cross-border crisis management measures.
This subject will necessarily return to the agenda of European bank leaders. The financial crisis saw the member states reacting on a case-by-case basis whenever they were forced to intervene to save a struggling bank. The emergency measures taken by three member states (Belgium, Luxembourg and the Netherlands) to separate out the parts of Belgian and Dutch bank and insurance juggernaut Fortis are a case in point. Mario Draghi, chair of the Financial Stability Committee (FSC), pointed out in Gothenburg that the G20 wanted progress to be made in the winding down of cross-border companies through the creation of special rules and mechanisms for this purpose. The FSC will be working on the drawing up of wind down plans, the obligation for complex company legal structures to be simplified and for greater cooperation in the ad hoc cross-border crisis management groups. The European Commission will soon be organising a public consultation exercise on how to make progress in this domain (see EUROPE 9989), and the ECOFIN Council at the end of the month may adopt a conclusions document requiring the FSC to set up a special working group to examine the issue.
According to the Council's Economic and Financial Committee (EFC), the financial crisis demonstrated that a joined-up approach is vital for crisis prevention, management and resolution. In a document seen by this newsletter that was submitted to the informal meeting, the EFC describes two areas of work, namely developing a pan-European framework for closer policy during a financial crisis without the need for legislation; and improving the regulatory framework governing crisis management by developing interoperable common mechanisms (for which new legislation will be required). In the first case, the ECOFIN Council and the EFC may be given a role, along with procedures and targets. The EFC believes it would be premature to revise the current non-binding Memorandum of Understanding (MoU) at this stage, despite the fact that the crisis demonstrated its shortcomings. This view is reportedly shared by Germany. On burden sharing among member states in the event of a failing bank, the EFC stays that there was general agreement that it was not possible for any agreement in advance to be drawn up giving calculation details or pledging specific sums of money. The EFC believes, however that the question of agreements in advance on general principles, criteria and procedures should be examined. Such arrangements would make it possible to determine in advance which member states would be involved in bailing out a specific cross-border bank and be responsible for organising the negotiations. Support at the Council for the idea of making such commitments legally binding is described as “limited”.
The EFC describes the divergences over the powers of the national authorities and the mechanisms at their disposal for detecting a struggling financial institution. The committee states that the European Commission is supposed to unveil draft legislation in this connection, particularly on the need to develop a special system for restructuring cross-border financial companies. EU Internal Market Commissioner Charlie McCreevy says that a more binding framework would inspire greater confidence, failing which we would be condemned to repeat the same mistakes. Jean-Claude Trichet, however, says that no national parliament could agree to binding solutions in advance. The EFC discusses the recent review of EU Directive 1994/19/EC on national savings guarantees which, it feels, does not cover the “fundamental” issue of how such schemes are funded. The EFC says that at the beginning of next year, the Commission should unveil draft legislation covering issues like the introduction of a pan-European savings guarantee system, an idea it has already put out to public consultation (see EUROPE 9919). (M.B./transl.fl)