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EU Commission Prepares Scheme for Bail-Ins To Be Run by Brussels
7 June 2013
(EIRNS)— The EU Commission has allegedly prepared a new scheme to supersede the Hollande-Merkel small step towards a Banking Union and a Banking Resolution (bail-in) Authority. The draft was presented as a discussion paper among EU Commissioners, and is currently unavailable to the public. According to press leaks, it puts the bank resolution authority under the EU Commission. Thus, no new agency will be created (as Merkollande wanted), but the resolution power will be successfully transferred from national authorities to the EU level (as Merkollande claimed to not want). The authority under the EU Commission will have the power of ordering bail-ins and will have a fund able to borrow on the markets (i.e., issuing bonds). Thus, the new scheme pushed by the Commission looks like a combination of deposits-looting and a Schachtian, Mefo bills type of financing mechanism. According to the Financial Times, 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 necessary equipment for money transfer, Oscar Schmerling, the Georgian press, 1906 "The structure and decision-making rules of this body should ensure the ability to effectively make decisions and the appropriate involvement of all directly affected member states, without however giving them a veto over decisions," the paper said, as quoted in the FT. 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. What the FT describes as a concession to Berlin pertains to 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." According to Frankfurter Allgemeine Zeitung on June 5, the new EU Commission proposal is much to the liking of German Finance Minister Wolfgang Schäuble, who had said before that EU treaties would have to be changed in order to establish a new institution. FAZ writes that "obviously the German government built a bridge for the Commission." According to sources in the EU Commission, last week’s German-French paper has contributed greatly to easing the political fight over bank resolutions. Germany and France have proposed that there be a central "resolution board" composed of national resolution authorities. The board should be able to decide "quickly, effectively and coherently" on resolution matters. FAZ claims that the concepts of EU Commissioner for Internal Markets and Services Michel Barnier and Berlin coincide, namely that the Commission itself should take over that job. It says that "Barnier’s ideas were obviously coordinated with Berlin." As for the "resolution mechanism," which is supposed to be financed by the banks themselves, until this is the case, the fund "shall be pre-financed on the basis of national final guarantee procedures," the FAZ says. Lastly, as we reported, the ESM is supposed — after all national funds have been filled — to come up with an "additional public final guarantee." This could be done by credits to member states or by direct recapitalization of banks (which has not yet been decided). The Franco-German paper reecommends that in the long-term, the "mechanism" and the ESM could be combined. Whether the Commission will also accept this German-French proposal, is still unclear.[CCC/EFI] |