Plus   Neg

EU Ministers Reach Deal On Banking Union

Eurozone 121913

European Union finance ministers on Wednesday struck a deal on a much-awaited scheme to handle bank failures in the region, ahead of EU leaders' summit in Brussels on Thursday.

The ministers agreed to set up a EUR 55 billion-single resolution fund over the next 10 years, financed by bank levies raised at national level. The fund will be backed by a new agency which will decide how to shut down a troubled lender.

During the initial build-up phase of the fund, bridge financing will be available from national sources, backed by bank levies, or from the European Stability Mechanism, according to existing procedures, a statement from the Ecofin said.

During this transitional phase, a common backstop, that would facilitate borrowings by the fund, will be developed. This would become fully operational at the latest after ten years.

The minsters agreed to establish a single resolution board, which, upon notification by the European Central Bank that a bank is failing or likely to fail, would adopt a scheme placing the bank into resolution.

The board would consist of an executive director, four full-time appointed members and the representatives of the national resolution authorities of all the participating countries.

Decisions by the board would enter into force within 24 hours after their adoption, unless the Council of the EU, acting by simple majority on a proposal by the Commission, objects or calls for changes.

The Single Resolution Mechanism or SRM will enter into force on January 1, 2015, while the bail-in and resolution functions would apply from January 1, 2016. The SRM regulation will not apply before the intergovernmental agreement enters into force.

The Ecofin called on the Lithuanian presidency to start negotiations with the European Parliament and reach an agreement on the SRM before the end of the Parliament's current legislature on May 2014.

The SRM will cover all countries participating in the Single Supervisory Mechanism or SSM, namely the euro area member states and those non-Eurozone countries that decide to join the SSM.

For comments and feedback contact: editorial@rttnews.com

Economic News

What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.

Follow RTT