Bank capital requirements
The Council was briefed on progress in negotiations with the European Parliament on two proposals – the "CRD IV" package – amending the EU's rules on capital requirements for banks and investment firms (doc. 16677/12).
It confirmed its commitment to reach an agreement with the Parliament before the end of the year. The two proposals set out to amend and replace the existing capital requirement directives by two new legislative instruments: a regulation establishing prudential requirements that institutions need to respect, and a Directive governing access to deposit-taking activities.
They are, inter alia, aimed at transposing into EU law the "Basel III" agreement, concluded by the Basel Committee on Banking Supervision and endorsed in November 2010 by G20 leaders. Numerous political and technical trilogues have been held with the Parliament on the CRD IV package since the Council agreed a general approach on 15 May. Further political trilogues are scheduled for 11 and 13 December in Strasbourg.
Based respectively on articles 114 and 53(1) of the Treaty on the Functioning of the European Union, the regulation and the Directive require qualified majority for adoption by the Council, in agreement with the Parliament.
This was the last ECOFIN Council to take place under the Cyprus Presidency, and was chaired by Cyprus’ Minister of Finance, Mr Vassos Shiarly. CRD IV, said Shiarly, is "a very important issue in order to establish stability in the financial sector. Despite the complications, the Cyprus Presidency will put maximum effort in order to conclude it by December 2012."
Bank supervision
The Council held a policy debate on proposals aimed at establishing a single supervisory mechanism (SSM) for the oversight of credit institutions, as part of a broader plan to establish a banking union. It agreed to hold an extra meeting on a date yet to be set before the European Council on 13 and 14 December, in order to reach an agreement that would enable negotiations with the European Parliament to start with the aim of approving the texts before the end of the year.
The proposals involve two regulations: one conferring supervisory tasks on the European Central Bank, the other modifying regulation 1093/2010 establishing the European Banking Authority. The SSM is a key element of the banking union, which also foresees a common resolution authority and a common deposit guarantee scheme.
The October European Council set 1 January 2013 as the deadline for agreeing on the legal framework set out in the two regulations, whilst indicating that work on operational implementation would take place during 2013.
In June, eurozone heads of state and government stated that once the SSM is in place, the European Stability Mechanism, which currently contributes to bank capitalisations via Member State treasuries, could have the possibility to recapitalise banks directly. This will enable the vicious circle between banks and sovereigns – which has been a salient feature of the debt crisis in Europe – to be broken.
Based on article 127(6) of the Treaty on the Functioning of the European Union, the draft ECB regulation requires unanimity for adoption by the Council, after consulting the European Parliament and the ECB. The draft EBA amending regulation is based on article 114 of the TFEU, which requires a qualified majority for adoption by the Council, in agreement with the Parliament.
“The Cyprus Presidency considers the creation of a Banking Supervisory Mechanism as a very important step for further strengthening the stability in the financial sector and deepening of the European Union. Our aim is to move forward on this issue as fast as possible and conclude by the end of the year”, said Mr Shiarly.
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See also Final push to conclude revised rules for capital requirements © Cyprus Presidency
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