28 February 2014

Bloomberg: Euro banks in dark on payment rules for resolution fund

EU Member States are tussling with the EP and among themselves over how money should be paid in to the SRF. "It all seems to be getting far too complicated", said ECON chair Sharon Bowles.

Some ideas being discussed by governments could "end up penalising or advantaging some bank models and therefore countries", leading to political clashes between nations, she said (by email).

One issue that has vexed talks between Member States and Parliament on a final version of the SRM bill is how to calculate the size of a bank’s payments to the single fund. In the blueprint proposed by EU finance ministers in December, one part of a bank’s contribution would be calculated based on the size of its liabilities, excluding state-guaranteed deposits and capital, and a second part on its risk profile.

This method of having “basically two pots, one risk-weighted and one not", is at odds with the Parliament’s approach, said Sven Giegold, the lawmaker leading work on the SRM rules for the assembly’s Green group. The Parliament based its approach to this issue on a related bill, the Bank Recovery and Resolution Directive, which sets EU-wide rules for how nations handle failing lenders. The BRRD foresees a single formula for calculating a bank’s levy based on the size of its liabilities, adjusted for the riskiness of its investments, Giegold said. The Parliament and Member States agreed on the BRRD last year, though it awaits final approval.

The Parliament opposes any bank levy that ignores risk, Giegold said, because lenders that take big risks should pay more. “I don’t like sustainable banks being put at a disadvantage", he said.

If the SRM bill becomes law, banks would probably have to wait for the EU to adopt technical rules on the calculations before they’d know how big their contributions would be. And even a point accepted by both the Parliament and Member States -- linking the size of the resolution fund to total covered deposits -- has raised questions among the banks that will be compelled to pay when the fund is operational.

Full article

© Bloomberg