06 February 2014

Plenary Session: Winding up banks - EP reconfirms mandate and criticises Council for timewasting

Their original negotiating mandate was confirmed by 441 votes to 141, with 173 abstentions. Group leaders in the debate before the vote criticised Council's stance, which, they said, was leading to a waste of precious time.

Throughout negotiations to date with the Greek Presidency of the Council, the negotiators, led by Elisa Ferreira (S&D, PT) have insisted that the Member States’ position has significant drawbacks which endanger the system’s core objective – that of ensuring that the taxpayer is not first in line to bail out for banks that run into trouble. The principal drawbacks are an overly complex and politicised decision-making process for winding up banks, and a bank-financed fund which MEPs say would struggle to be credible in the first years of its life.

Parliament’s negotiators are also concerned about the EU countries' wish to build an  intergovernmental chapter  into the system, especially if there are no sound legal grounds for it.

Speaking at the end of the second debate on Thursday, EP President Martin Schulz said that he would send a request to Council for an extraordinary ECOFIN meeting to be convened earlier than that scheduled for 17 February, so as to avoid a two-week delay to the negotiations.

The mandate in a nutshell

Parliament's negotiating mandate, as first set out by the Economic and Monetary Affairs Committee in December and reconfirmed in Thursday's plenary vote, calls for a lean decision-making system capable of winding up a bank over a weekend.  It entrusts key roles to the banking supervisor and resolution authority so as to ensure that the process of shutting down a bank is not prone to political paralysis. Yet it also gives some extra powers to the Resolution Board, on which national authorities are represented, to ensure an appropriate balance between tasks undertaken at EU and national levels.

The mandate would also allow the bank-financed resolution fund to tap loans in its early years, so as to ensure that its firepower would be credible from the start rather than only when it reaches its “cruising fund level” after 10 years. Any loans taken out by the fund would be repaid by the banks, on top of their annual contributions to it. The mandate also provides for a fund design which would ensure that all banks are treated in the same way, and have equal rights of access to it.

Next steps

Parliament and Council negotiators will continue their talks with a view to reaching a deal on the regulation. In parallel, Parliament’s negotiators are taking part in intergovernmental talks on the details of setting up the resolution fund.

Press release

Video of a plenary debate - Uniform rules and procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund: outcome of the negotiations - Thursday, 6 February 2014 - 11:03 - Strasbourg

EuroparlTV: Europe pressed to conclude final pillar of Banking Union

Statement by ECOFIN President Yannis Stournaras

"We take note of the vote today by the European Parliament on the amendments to the SRM regulation. The SRM is one of the key elements of Europe's Banking Union and a top priority for the Greek Presidency. All parties involved should now move ahead with reinforced vigour to adopt the legislation before the end of the parliamentary term, as called for by the European Council in October.

The Council has indicated its flexibility and willingness to discuss all issues in an open manner and in a spirit of compromise. There are fundamental principles on the SRM that both Parliament and Council agree on. We are confident that it should be possible to bridge the gap between our positions in all issues."

Press release

S&D - "We are ready to negotiate with the Council”

S&D Group president Hannes Swoboda said: "The Socialists and Democrats are eager to reach a deal before the May elections but not just any deal. No solution is better than a bad deal. We want a Banking Union that is efficient, simple and one that respects the Community Method. The "take it or leave it" strategy of the EU Council is unacceptable. We demand that the Council decides without delay on a mandate for negotiations with the European Parliament.

"The Council offers a weak, inefficient, nationalised proposal that comes in way below the Commission's line. The separation of the Single Resolution Mechanism (SRM) and the Single Resolution Fund outside of community control and subject to lengthy bureaucratic approval procedures is nonsense. When a bank is really in trouble, we need to act fast.

"We will simply not downsize to the lowest common denominator to meet the Member States' standards. Our aim is to build a comprehensive Banking Union to prevent any crisis which millions of Europeans are still suffering from through no fault of their own. It is time to have a solution that puts the burden on the banks and not on tax payers."

Full press release

Greens/EFA - EP draws line in the sand on EU architecture for single resolution mechanism

The Greens welcomed the outcome and called on EU governments to give way on their insistence that the new mechanism be set up on an intergovernmental basis, rather than as an EU entity.

Commenting after the vote, Green economic and finance spokesperson Sven Giegold said: "The European Parliament has today drawn a line in the sand on the need to ensure the proposed bank resolution mechanism is set up as an EU entity and not an unwieldy intergovernmental construct. With legislative negotiations between the Parliament and EU governments deadlocked on the legal basis and structure of the proposed mechanism, this vote makes clear that Parliament is serious. Hopefully, EU finance ministers - who have hitherto been picking apart the original proposals from the Commission - will now see sense."

Green economic and finance spokesperson Philippe Lamberts added: "Today's vote would create a true and independent single resolution authority covering the whole European banking sector. The intergovernmental architecture being proposed by EU governments, on the other hand, would create a cumbersome and unmanageable patchwork. The complicated voting arrangements being mooted would render the mobilisation of the fund very difficult. This would leave us back at square one, with individual sovereigns footing the bill for bank resolutions and the devastating consequences this has been shown to have for public finances."

Full press release

In a joint statement with Rebecca Harms, President of the Greens/EFA in the European Parliament, Sven Giegold added: "With this decision, the European Parliament in a consensus across all parties is putting itself on a collision course with the grand coalition in Berlin. The targeted intergovernmental decision-making mechanism is bureaucratic and totally unsuited to deal with crisis situations and to protect the taxpayers from new bank failures. It is in direct contrast to the democratic principles of the European Union and the promised Banking Union. Therefore, the European Parliament demands that the decision as to whether an institution is to be resolved should be taken by a committee consisting of European representatives. It must be ensured that the members of the European Parliament have a say in the appointment of the decision-making body. That is the only way to ensure that decision-makers are democratically controlled and are committed to the common good of Europe. 

"The European Parliament also wants to create a genuinely unified European resolution fund. Only such a fund would complement the European resolution mechanism and allow that in the future the banking sector has to pay its own bills. In contrast, the German government wants to introduce new national austerity programmes for outstanding invoices from banking crises for another decade. We are delighted that the SPD parliamentary group has now in a letter taken side of the European Parliament. Now it is high time that the federal government followed suit."

Full statement (in German)

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