Finance ministers of the 18 euro zone countries gather today in Brussels to advance negotiations on the Single Resolution Mechanism, amid disagreements between states and the European Parliament on the details of Europe's proposed new bank resolution fund.
Following months of negotiations, member states finally reached agreement in December on the shape and funding structure of a single resolution authority, the so-called the second “pillar” of banking union.
Known as the Single Resolution Mechanism, the body will be a single, centralised authority underpinned by a €55 billion fund financed through bank levies, which would have the power to decide on and fund the resolution of banks in difficulty.
But the proposal needs the backing of the European Parliament before the assembly breaks up ahead of elections in May. At today’s meeting, finance ministers will receive an update from the Greek presidency of the EU council which has been leading negotiations with the European Parliament at official level since Christmas.
Mutualisation time frame
The parliament is at odds with the member states' common position on a number of issues, including where the responsibility for decisions on when and how banks are wound up resides, and the time period during which the bank rescue fund is "mutualised".
A number of member states – including Ireland – favour an accelerated move towards a fully "mutualised" fund. While member states agreed in December the fund will move from comprising "national compartments" to being a fully shared or "mutualised" fund over a decade, the European Parliament wants this cut to five years.
Last week, European Central Bank president Mario Draghi outlined his support for the full mutualisation within five years. "To be clear, this would not imply that banks have to pay higher fees. The fund would still only reach its target level after 10 years, yet it would be a truly single fund after five years," he said.
Acceleration of process
His comments address concerns from Germany, which has questioned if the merging of the national compartments could proceed faster than bank levies are collected. French finance minister Pierre Moscovici indicated last week France "wouldn't be against" the proposal to "speed up" the fund.
The issue of how much power member states will have over decisions surrounding the wind-up of banks is also expected to be discussed. This will include details of the role of national resolution authorities in decision-making, and whether decisions are made by the single resolution board in its “executive” or “plenary” formation.
Tomorrow there will be meeting of all member states.
