June 3, 2013 7:13 pm
Brussels bank resolution blueprint sets up clash with Germany
Brussels is to propose giving itself powers to wind up failing eurozone banks, in an uncompromising banking union plan that pays little heed to Germany’s legal and political concerns .
According to a summary of the “single resolution mechanism” proposal seen by the Financial Times, power to shut down banks would be centralised in the European Commission. Brussels would have the clout to overrule the bank’s home country and use funds from a central pot.
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The blueprint for the resolution authority is due to be published this month. While the details remain in flux, the discussion paper, provided for a debate between EU commissioners on Wednesday, indicates that Brussels is not trimming its ambitions to suit German objections.
The paper argues that “the commission is the best placed institution to adopt all relevant decisions related to resolution with a discretionary nature”. A newly created resolution body would prepare, propose and enforce decisions via an executive board – dominated by nominees from the commission and European Central Bank, rather than member states.
“The structure and decision-making rules of this body should ensure the ability to effectively take decisions and the appropriate involvement of all directly affected member states, without however giving them a veto over decisions,” the paper said.
The commission wants the resolution authority to “be equipped with a single bank resolution fund”. The fund would have the power to borrow from markets, using the “assets of euro area banks” as a guarantee and backstop.
“This would provide substantial synergies and enhance financial stability, compared to a mere network of national resolution funds, by pooling resources from and for all participating banks,” the paper said.
One of the few concessions to Berlin regards the administration of resolution decisions. Once the commission decides that a bank should be shut down, the resolution is implemented by member states under “the oversight of the central body”.
FT Series
The EU’s banking union plans seek to place eurozone banks under the overarching supervision of the ECB
François Hollande, the French president, and Angela Merkel, the German chancellor, surprised many in Brussels last week by reaching their own agreement on a new bank bailout system that appeared less ambitious than either the commission or the ECB wanted.
In their nine-page “contribution”, the two leaders called for the system to be run by a “resolution board” made up of national authorities rather than a single EU agency with the power to restructure and recapitalise European banks on its own.
Germany has resisted such centralisation, arguing that it violates EU treaties by giving Brussels more power to close banks and seize assets than legally allowable. France had previously sided with the ECB and the commission – which have legal opinions saying current treaties are adequate.
In addition, Mr Holland and Ms Merkel said the new bank resolution authority could eventually become part of the European Stability Mechanism, the eurozone’s €500bn rescue fund. Voting at the ESM gives vetoes to the three biggest eurozone countries – Germany, France and Italy.
Copyright The Financial Times Limited 2013.
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