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EU’s Barnier Says No Plan B for Single Bank Resolution System

EU Commissioner For Internal Market & Services Michel Barnier said that his plan would avoid a repeat of the prolonged haggling that surrounded the bailout and dismemberment of French-Belgian lender Dexia SA in 2011. Photographer: Jock Fistick/Bloomberg
EU Commissioner For Internal Market & Services Michel Barnier said that his plan would avoid a repeat of the prolonged haggling that surrounded the bailout and dismemberment of French-Belgian lender Dexia SA in 2011. Photographer: Jock Fistick/Bloomberg

Aug. 30 (Bloomberg) -- The European Union’s top financial-services official warned euro-area nations that there is no alternative to a single system for handling failing banks, as he urged them to reach rapid agreement on a draft law to pool decision-making.

“There is no plan B,” Michel Barnier, the EU commissioner for internal market and services, said in an interview yesterday with Bloomberg Television at a conference of the French employer’s federation in Jouy-en-Josas, France. “It’s urgent that we deliver this second pillar of the banking union, which the euro area needs for its stability.”

EU leaders called last year for euro-area countries to put in place joint oversight and crisis management of lenders in a bid to repair confidence in the solidity of the bloc’s banking system. While governments have approved the project in principle, plans presented by Barnier in July to centralize decisions on how to resuscitate or wind down an imperiled bank have met staunch opposition from Germany, which argues that the proposed measures are illegal.

“I don’t exclude what German Finance Minister Wolfgang Schaeuble wants - that we could, with a later treaty change, improve and consolidate the system,” Barnier said. This shouldn’t prevent the bloc from pressing ahead rapidly under its current rulebook, he said.

While he is open to compromise, “the only thing that I can’t accept is a system that won’t function,” Barnier said.

Barnier said that his plan would avoid a repeat of the prolonged haggling that surrounded the bailout and dismemberment of French-Belgian lender Dexia SA in 2011.

Dexia Limits

“We have seen the limits” of current procedures, Barnier said. “When you need in a crisis to get together on a Friday or a Sunday, bring together the national resolution authorities, which aren’t used to working together, and who don’t have a system for taking joint decisions, that presents big risks; we’ve seen it with Dexia,” he said.

The plans for a single resolution system are the second plank of the banking union project. A deal on the first part -- giving supervision powers to the European Central Bank -- was reached earlier this year.

Barnier said he was “worried” that the EU could face a situation where supervision is transferred to the European level, but resolution remains a national competence.

“Logic” dictates that resolution should also be dealt with at EU level, he said.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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