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This week, Lithuania made its first attempt at finding a compromise on the proposal. At a meeting in Brussels on Wednesday, the country’s ambassador handed his counterparts a list of five possible options to better protect national budgets.
The first option was to grant Member States a veto over decisions that would require them to spend money on the resolution or restructuring of one of their banks. That proposal — broadly supported by Luxembourg, the Netherlands, Slovakia and Estonia, according to an EU official — would settle the legal issue. But it would undermine one of the central goals of creating a single resolution mechanism, namely to eliminate national bias in resolution decisions.
A less radical variant — broadly backed by France, Ireland, Cyprus, Latvia and Poland — would give the affected state’s vote more weight in decisions on the resolution board. However, some ambassadors worry that doesn’t go far enough to protect states’ control over their budgets.
A third option was to bring forward the date from which even senior bond-holders and large depositors would have to take losses when a bank runs into trouble – a move that could sharply cut the cost of resolution.
Under separate legislation, that is also still being negotiated, this so-called “bail-in” wouldn’t start until 2018. Lithuania suggested bringing the start date forward to 2015, when the single resolution mechanism is due to kick in. That option was broadly supported by the European Central Bank, Denmark, the Netherlands and Germany, according to an EU official. In fact, Berlin wants the tougher stance on bail-in to come in combination with a veto right, or weighted voting, the official said.