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The European Commission has adopted a Communication on an EU framework for crisis management in the banking sector. The purpose of the Communication is to consult as widely as possible on a broad range of issues aimed at safeguarding financial stability and the continuity of banking services in a cross-border banking crisis. The Communication poses questions about the tools that the Commission considers might be necessary for an EU crisis management framework. These tools range from “early intervention” action by banking supervisors aimed at correcting irregularities in banks, to bank resolution measures which involve the reorganisation of ailing banks and to insolvency frameworks under which failed banks are wound up. The Commission’s consultation will last for three months, and will be followed by a public hearing to present the results and set out the Commission’s intentions.
The Commission's consultative Communication adopts a broad ranging approach to the complex and inter-linked issues surrounding crisis management:
· Under "early intervention" (i.e. when the ailing institution is still a going concern and when supervisory intervention can still remedy the situation), the Communication considers the need for new supervisory tools, possibilities to transfer assets between different legal entities and across borders within a group, and the feasibility of wind-down plans.
· Under "bank resolution", consideration is given to the need for new re-restructuring tools and a framework to support their use in a cross-border context. Views are also sought on how the challenges facing stakeholders in banks such as shareholders and creditors could be best addressed in an EU crisis management framework, especially with respect to changes to insolvency and company law.
· The important question of how bank resolution measures need to be financed is raised with a clear preference for private sector solutions, while at the same time recognising that inevitably burden sharing between Member States will need to be addressed.
· Under "insolvency", consideration is given to the need to harmonise existing insolvency procedures in order to facilitate the winding up and re-organisation of cross-border banking groups.
The Commission views such a consultation as an essential first step in preparing the ground for what will be an important new policy area. A public hearing will be organised in February 2010. Deadline for comments is the 20th January 2010.