The European Commission is proposing itself as the single authority for winding down banks in the eurozone, a step that will set the European Union's executive on a collision course with the bloc's most powerful member, Germany.
Berlin insists that such an authority—whose actions could force national governments to spend money to help rescue failed banks—would breach EU treaties. That, it says, could lead to legal challenges over bank restructurings and create uncertainty for financial markets at a sensitive time.
Michel Barnier, the EU commissioner responsible for financial-market regulation, laid out his final proposal for a so-called single resolution mechanism, giving it the authority to restructure or close any of the 6,000 banks in the 17-nation eurozone that hit financial problems. Bank restructurings currently take place under a patchwork of national rules, which also hinder the winding down of cross-border banks.
The commission calls for a so-called "single resolution board" to prepare and carry out bank restructurings, backed by a shared fund that would be financed by contributions from banks. The board would comprise representatives of national resolution authorities, the commission and the ECB. Its chief and deputy would be appointed by national governments. National resolution authorities would be in charge of implementing the board's decisions at a local level—but, crucially, the commission alone will decide whether and when to place a bank in resolution.
The proposed single resolution fund would be built up over time by contributions from banks, and eventually replace national resolution funds. Its target size would be 1 per cent of banks' covered deposits, or around €55 billion, based on 2011 data. It will, however, take 10-14 years before such a fund would have sufficient resources.
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