11 March 2014

Commissioner Barnier: Introductory remarks on the SRM

Barnier said it was imperative that the Greek Presidency be given a revised mandate, including the necessary leeway to enable an agreement with Parliament, in the coming days. He elaborated in detail on the points where he saw scope for convergence.

Translated from the French

It is now imperative that we give Iannis Stournaras a revised mandate, including the necessary leeway for him to find a compromise with Parliament. We know that time is short. We know that Parliament is in a constructive spirit and is demanding a certain number of points as Ms Ferreira reminded us yesterday. We have all the elements to achieve a balanced compromise between the co-legislators. It is based on four pillars:

1. an Intergovernmental Agreement (IGA) essentially limited to the transfer of contributions and mutualisation;
2. a role of the Council limited to cases where the Commission would propose to use a higher amount of the Fund than proposed by the Board;
3. governance of the Board which ensures equal treatment of all cases of resolution giving the executive board the flexibility it needs;
4. a shortened transition period to a fully shared Fund with access from the first day to sufficient resources.

More precisely, taking into account the number of points raised in the very useful and important note from the Presidency could lead to a good compromise:

1. The interaction between the SRM regulations and the Intergovernmental Agreement (IGA); two points are crucial on this subject:
   
   (i) A limited content of the IGA, as requested by the Parliament with the transfer of the following three items to the SRM rules: The legal provisions for future accession countries that have not adopted the euro; the powers of the board in respect of temporary transfers between national compartments; cost allocation between national contributions in the event of resolution of a group.
   
   (ii) in respect of funding, a key compromise with the Parliament would be accelerating the pooling of national contributions and the establishment of a credible fund that is accessible from day one, at least for bridge financing. Non-linear mutualisation in eight years together with filling the Fund over eight years could be a good compromise.
    
2. Governance of SRM should be simple. The first issue is the institution in charge of triggering the process of resolution. Parliament rightly considers that the current solution is too complex and the role of the Council too important given the weight of the plenary in the governance of the Board. The proposal made by Jutta Urpilainen seems more effective and legally safe. This would give the Council a veto when the Commission, in the public interest, proposed to use a larger amount of the Fund than proposed by the Board. In case of disagreement between the Commission and the Council, the Council has the responsibility to take the final decision.
   
   In this context also arises the issue of conflict of interest and Article 16a(1). The text of the common approach is unacceptable to the Commission. It would be an interference with the right of the institutions to decide upon their internal organisation, as we have indicated in our statement of 18 December.
   
   The second question concerns the institution that is to determine whether a bank is no longer viable and therefore initiate the process of resolution. On this point, I support the proposal of the Presidency, which is balanced.
   
   The third question is about the role of the plenary session of the board in relation to its executive board. My personal preference is for option 1 of the Presidency, which echoes the idea of Parliament. The executive board would act within the framework put in place by a 'Resolution Handbook'. 
   
   I also support the Presidency's proposals to eliminate the €5 billion threshold which from my point of view has several disadvantages: Firstly, it would represent 100 per cent of the Fund in year one but less than 10 per cent by the end of the transition period; and secondly it would create inequality between banks and a "first mover advantage". Finally, it would create "cliff effects" at the end of every year.
   
   If the Council wants a safeguard against a cumulative use of funds by the executive board, then it should be formulated in relative terms (percentage) over a period of rolling 12 months.
   
   The fourth question addresses voting arrangements in the plenary. Again, I support the proposal of the Presidency as it responds to the request of Parliament to facilitate decision-making. Simple majority should be the rule in the plenary. The threshold of 50 per cent of contributions should be removed beyond the transitional period, as proposed by the Presidency.
    
3. Finally, it is essential to ensure the credibility of resolution funding. For this, it is important that the Fund has access, from day one, to liquidity and credible and sufficient financing. I therefore support the proposal of the Presidency to bring in the wording of Rule 69 of Parliament's text. In this regard, it needs to be ensured that the Fund can borrow from the markets. None of the options on the table so far has made it possible to come to an agreement. However, it is likely that the Fund may not be able borrow at a reasonable cost unless it has guarantees. In the absence of such guarantees, I see only two realistic options: Either provision of a credit line by a European institution or direct financing by Member States. To minimise the cost of financing, the least expensive solution seems to me to be a guarantee by the ESM or a progressive pooling of public guarantees corresponding to the progressive pooling of the Fund.

I believe it to be imperative that after this meeting, the Presidency has a mandate for negotiations which are likely to enable an agreement with the Parliament in the coming days. If everyone shows goodwill, we must and can achieve a compromise.

Full speech (in French)

See also: Main results of the ECOFIN-council on-SRM

© European Commission