RECOVERY AND RESOLUTION OF CREDIT INSTITUTIONS: EESC MAKES CONCRETE PROPOSALS FOR ADEQUATE IMPLEMENTATION

The financial crisis has shown that national authorities are not fully equipped to deal with failures of banks that operate in today’s global markets. Between October 2008 and October 2011, governments injected EUR 4.5 trillion (37% of EU GDP) of public money into the banking sector.

13-12-2012 — /europawire.eu/ — The EESC supports a Commission proposal that sets out to bring this situation to an end by providing a clear framework for the recovery and resolution of credit institutions and investment firms. This coincides with the ECOFIN-Councilon 13 December setting out its position on two further legislative proposals on the way towards a banking union, aimed at establishing a single supervisory mechanism for the oversight of credit institutions.

Lena Roussenova, rapporteur for the EESC opinion on Recovery and resolution of credit institutions, explains that “the ultimate aim is to establish a strategic framework for managing bank failures in an orderly way and avoiding contagion to other institutions. The Committee is convinced that a solution depends on the relevant authorities having effective tools and powers”.

In the future, the relevant authorities will have the means to intervene decisively both before problems occur and early on in the process. The proposed tools are divided into powers of “prevention”, which for example require the banks to draw up recovery plans, “early intervention” and “resolution”.

In what concerns prevention, the EESC accepts the proposal that resolution authorities, in consultation with the competent authorities, should draw up and update resolution plans. The Committee is convinced that both individual and group resolution planning and updating would be improved if banks were also involved in the process. The professional advice of other stakeholders, for example consumer organisations, trade union representatives, etc., that could be affected by the resolution plans should also be sought on relevant matters where appropriate.

Early intervention will ensure that financial difficulties are addressed as soon as they arise. Supervisors will have the power to appoint a special manager assuming a significant role in a bank in financial difficulties. However, the EESC points out that explicit and clearly defined triggerrules and conditions must exist to determine when such intervention may occur.

Resolution takes place if the preventive and early intervention measures fail to redress the situation. Critical functions of the bank can be rescued while the costs of restructuring and resolution will fall upon the bank’s owners and creditors. In this case, the EESC believes that the powers and responsibilities of the resolution authorities need additional clarification concerning their mission and the timing of intervention.

Furthermore, the EESC would like to emphasise that some of the tools (the bail-in tool) and measures proposed by the Commission have not been tested yet in systemic crises and need additional clarifications in order to minimise any uncertainties among investors.

Finally, the Committee would welcome the introduction of harmonised funding rules based on ex ante contributions for deposit guarantee funds and resolution funds; there should, however, be a provision allowing the criteria for ex ante contributions to be revised from time to time.

For more information, please contact:

Karin Füssl, Head of the Press Unit

E-mail: karin.fussl@eesc.europa.eu

Tel.: +32 2 546 8722