European Union countries that bail out banks should be forced to take equity stakes in them as a way to recoup taxpayer investments, according to the European Parliament’s lead lawmaker on bank-resolution plans.
Forcing countries to take an equity stake in firms they support is one of the parliament’s main priorities as talks with EU nations begin on bank resolution and recovery rules, said Gunnar Hoekmark, the lawmaker in charge of work on the legislation. Parliament also wants to provide more protection to deposit-guarantee funds and remove numerical thresholds for the types of losses imposed on investors.
Nations and EU lawmakers are negotiating the new rules as part of a broader push toward a banking union that will put the European Central Bank in charge of euro-area bank supervision. Michel Barnier, the EU’s financial-services chief, will release plans tomorrow for a single resolution mechanism that will complement the resolution rules for nations now under discussion.
The new rules need to have flexibility without “gray zones,” Hoekmark told reporters in Brussels today, saying he hopes to reach a deal by year-end. He said the parliament will seek to remove the requirement, eked out by nations over two grueling meetings last month, that private-sector investors absorb losses equal to 8 percent of a distressed bank’s liabilities before nations can intervene.
Hoekmark said nations need to have two separate funds for protecting depositors and for covering the cost of bank resolution. Countries also need strong powers for banks to pay back the cost of government action, since standing resolution funds and EU-wide resources won’t be big enough, he said.
For example, he said, the European Stability Mechanism only has 60 billion euros ($76.8 billion) set aside for direct aid to banks whose failure would threaten financial stability. “That is what would be needed for Bankia, in Spain, in one decision,” Hoekmark said.
“If you are not to create a super-super-super fund, you will always need member states to take the responsibility. Or Germany,” he said. “And that’s why Schaeuble is very hesitant toward this proposal tomorrow.”