- Dombrovskis says EU needs backstop for `credible' start to SRB
- Proposed credit lines would keep funds tied to each country
European Union finance ministers on Tuesday sought to keep national control over bridge financing for the fledgling agency that will handle bank failures after Jan. 1.
The EU still hasn’t agreed on a plan for bridge financing to the Single Resolution Board and its accompanying Single Resolution Fund, which gain oversight powers next year over failing banks within the euro area’s banking union. SRB Chief Elke Koenig told finance ministers Monday that nations need to make progress on the backstop and adopt all necessary legislation so the new agency can start on firm footing.
German Finance Minister Wolfgang Schaeuble said any bridge financing should only be made available through national compartments -- meaning countries would only backstop their own contributions to the resolution fund rather than other nations. Banks are due to build up the SRF gradually, with funds staying tied to individual nations until the fund reaches its full strength of a projected 55 billion euros ($59 billion).
Backstops are essential for the new agency to be credible from the get-go, European Commission Vice President Valdis Dombrovskis told reporters after meetings in Brussels. He said Tuesday’s talks made “good progress” given the urgency of reaching a deal by year-end.
“The sooner member states can commit available credit lines to the fund, the quicker Elke Koenig and her team at the Single Resolution Board can act,” he said.
Under current proposals, the credit lines “are directed at individual countries so these amounts are not pooled,” said Luxembourg Finance Minister Pierre Gramegna. In a cross-border bank failure, the backstops of several nations could be affected but “these credit lines remain, in their essence, national,” he said at a press conference after the meeting.
Dutch Finance Minister Jeroen Dijsselbloem told reporters Tuesday that bridge financing was a “very important” part of measures needed so “the banking union can take a next step next year.” The Netherlands on Tuesday approved the last legislative measures needed to implement new EU bank-failure rules, after the EU Commission last month took it and five other nations to court over the measures.