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02 December 2009

2 December ECOFIN Council conclusions on financial stability and crisis management

The Council adopted the following conclusions:

"The Council RECALLS, further to its conclusions of 9 October 2007 and of 14 May 2008 on financial stability arrangements, its broad conclusions of 20 October 2009 on strengthening EU financial stability arrangements, where it underscored the importance of, in particular, developing "common and interoperable tools to improve Member States' ability to adequately handle a financial crisis" and "a comprehensive EU-wide framework for closer policy coordination on financial stability", AND agreed on a timetable for further work in coming months.
I) The EU regulatory framework
On that basis, the Council WELCOMES the preparatory analysis carried out by the Commission in its Communication on an EU framework for cross-border crisis management in the banking sector, covering three main areas of early intervention, bank resolution measures and insolvency proceedings. The Council NOTES that owing to the consultative nature of that Communication, policy options are considered in very broad terms and REITERATES that subsequent policy proposals, as stated by the Commission, need to be accompanied by further and more thorough impact assessment.
Based on the articulation of issues in the aforementioned Commission Communication, the accompanying Commission staff working paper and its related impact assessment, the Council AGREES on the following orientations for further Commission work in the short-to-medium term:
1. As regards supervisory early intervention, faced with the need to provide supervisors with additional tools to address developing problems, priority should be given to supplementing the tools listed in Article 136 of the CRD with additional tools that are not currently available to authorities in all Member States - such as powers to require submission of a restoration plan and enhanced powers towards the banks management- as well as any other provision so as to reinforce and converge early intervention powers for supervisors.
2. To address differences in the ways in which early intervention actions are currently initiated, priority should be given to developing a shared set of early warning indicators and developing a framework for common assessment as a means of (i) determining the appropriateness of an intervention and (ii) facilitating cooperation, in such a way as to enable joint responses but maintaining a sufficient degree of flexibility and discretion as appropriate.
3. To address the challenge of dealing with cross-border groups whose subsidiaries may be subject to different supervisory and legal regimes, the work ahead should further explore the feasibility of developing mechanisms which would make it easier for the relevant authorities to take coordinated decisions on the basis of a common assessment taking into account a group resolution plan.
4. In terms of banking resolution, the Commission should take into account the following key objectives and priorities:
– As an overarching goal, stability of the financial system should be preserved, while limiting public intervention so that it should always be possible – politically and economically – to allow banks to fail, whatever their size, incl. by:
– Minimising contagion and providing the necessary legal conditions for an orderly winding up;
– Ensuring the protection of depositors and the continuity of banking and payment services as necessary;
– Reducing significantly moral hazard and creating certainty and predictability around bank resolutions for all stakeholders: owners, creditors and counterparties;
– Operationally, the reorganisation and resolution of cross border banks in a timely and robust manner, assisted by the development of firm-specific recovery and resolution plans, as well as cooperation of national resolution authorities, should be improved to deliver optimal solutions at EU level.

© European Council

Documents associated with this article

ECOFIN council conclusions 2 Dec.pdf

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