European Union finance ministers will seek to hammer out an accord on a law to tackle too-big-to-fail banks after France sought last-minute changes to planned exemptions for U.K. lenders.
Envoys from the EU’s 28 nations abandoned efforts to reach a deal on Wednesday after France warned a technical change was necessary to prevent U.K. banks having a competitive advantage, according to three people familiar with the talks. A number of EU nations at the meeting, including the U.K., had backed the current version of the bill, which is the product of months of compromise talks.
Latvia, which holds the EU’s rotating presidency, won’t suggest changes to the bill ahead of the finance ministers’ talks, saying that the current text represents “a fair compromise between the various positions on all the key issues and that further movement would put at risk this delicate balance,” according a June 18 document seen by Bloomberg.
The draft law is the EU’s latest bid to tackle risks posed by its biggest banks and to shield taxpayers from having to bail them out if they fail. The European Commission, the EU’s executive arm, made proposals in January 2014 on how supervisors should assess banks to determine if they should have to split off investment banking from consumer services.
National officials have been holding talks since last year on how to redraft aspects of the plans.
The Brussels-based commission has advocated a carve-out that would shield the U.K. from having to amend its own rules -- known as the Vickers plan -- which predate work on the EU law; that idea has had broad support from nations. Still, intensive talks have taken place this month on the details of the exemption.
Part of the French requests centered on the application of so-called large exposure rules that would cap the amount of business different units of a separated bank could do with each other, according to two of the people.
France’s concern is that U.K. banks benefiting from exemptions could be placed at a competitive advantage by not having such limits calculated on the same basis as firms covered by the EU rules.
It proposed that the European Banking Authority should be empowered to draft guidelines on the assessments that supervisors should carry out before setting such limits, two of the people said.
No country expressed support for the French requests, which were rebuffed by nations including the U.K. according to the people.
The current text received “broad support,” and there was “reluctance expressed by some delegations in respect to possible further changes,” according to the Latvian document, which has been circulated to nations ahead of the ministers’ meeting. At Wednesday’s talks, “a large number of member states and the commission supported this presidency compromise, while one delegation requested clarifications.”
Latvia will put the file on the agenda of an EU finance ministers’ meeting in Luxembourg on June 19, the people said.
“After discussions among ambassadors today, the Presidency feels that the dossier on Banking Structural Reform is ripe for a decision by ministers on Friday,” Janis Berzins, a spokesman for the Latvian EU presidency, said in an e-mail on Wednesday.
The French Finance Ministry in Paris and the U.K. government’s office in Brussels declined to immediately comment.