The European Commission’s proposal for a single European resolution authority for failing banks is “defensible,” though potential conflicts of interest must be prevented, Dutch Finance Minister Jeroen Dijsselbloem said.
The European Union plan would bring together national regulators in a resolution board that would draw up plans for intervening at struggling banks. The final decision to initiate the measures would rest with the European Commission, the EU’s regulatory arm.
In a letter to the Dutch parliament, Dijsselbloem, who heads meetings of euro-area finance ministers, said the commission’s “prominent role” in the plan put forward in July by Michel Barnier, the EU’s financial services chief, contains the potential for conflicts of interest with its other functions, such as regulating state aid and the single market.
The Netherlands seeks a resolution authority that is “as independent as possible, whereby any potential conflict of interest between the various roles of the European Commission and the European Central Bank must be prevented,” Dijsselbloem said.
European Union 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, Barnier’s plan 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 under current rules.
‘No Plan B’
“There is no plan B,” Barnier said earlier this month. “It’s urgent that we deliver this second pillar of the banking union, which the euro area needs for its stability.”
Dijsselbloem, on behalf of the Dutch cabinet, said conflicts of interest could be resolved by limiting the role of the European Commission and the ECB, which is scheduled to assume oversight of euro-area banks next year, and making the Single Resolution Board an “independent body.”
He also said that the current proposal isn’t sufficiently clear about who will decide which resolution instruments to use in individual cases, and specifically to what extent the bail-in instruments must be applied. Dijsselbloem wants the Single Resolution Board to make this call.
Dijsselbloem said he supports Barnier’s call for a 55 billion-euro ($73 billion) common resolution fund financed by levies on banks. The fund would be able to tap markets, backed by the assets of the banks it covers.
Barnier’s draft law needs approval by governments and the European Parliament before it can take effect.