12 Banking Union: single resolution
mechanism
| (a)
(35195)
12315/13
COM(13) 520
(b)
(35512)
15863/13
—
|
Draft Regulation establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No. 1093/2010.
European Central Bank Opinion on a draft Regulation establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No. 1093/2010 (CON/2013/76)
|
| Legal base | (a) Article 114 TFEU; co-decision; QMV
(b) —
|
| Department | HM Treasury
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| Basis of consideration | Minister's letter of 12 December 2013
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| Previous Committee Reports | (a) HC 83-xiii (2013-14), chapter 19 (4 September 2013) and HC 83-xxiii (2013-14), chapter 10 (4 December 2013)
(b) HC 83-xxiii (2013-14), chapter 10 (4 December 2013)
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| Discussion in Council | Probably 18 December 2013
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; but conditional scrutiny waiver granted
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Background
12.1 In September 2012 the Commission published a Communication
about establishing a "Banking Union" and two draft Regulations
concerning supervision of the banking sector.[42]
One draft, now adopted as Council Regulation (EU) No. 1024/2013
(the ECB Regulation), confers tasks on the European Central Bank
(ECB) concerning policies relating to the prudential supervision
of credit institutions. The other, now adopted as Regulation (EU)
No. 1022/2013 (the EBA Amending Regulation) amends consequentially
the Regulation establishing the European Banking Authority (EBA).
12.2 The ECB Regulation gives the ECB specified
supervisory tasks in relation to the prudential regulation of
credit institutions established in the eurozone, through a Single
Supervisory Mechanism (SSM). This transfer of responsibilities
to the ECB is intended to ensure an effective prudential supervisory
mechanism within the eurozone. There is an option for non-eurozone
Member States to participate in the SSM through a "close
cooperation" arrangement on an opt-in basis. Collectively
eurozone Member States and those choosing to opt in would be known
as "participating Member States". The ECB is to carry
out its tasks within the existing EU supervisory framework and
will not take over any tasks from the EBA. The EBA will continue
to work towards a single rulebook, regulatory convergence and
consistency of regulatory practice.
12.3 Also relevant to establishing the Banking
Union is a draft Bank Recovery and Resolution Directive (the BRRD),
which would set the rules for dealing with the recovery and resolution
of credit institutions and investment firms in all Member States.[43]
In June the ECOFIN Council agreed a general approach on the BRRD[44]
for discussions with the European Parliament. Following those
discussions the Council modified its general approach on 10 December,
with a view to concluding a deal with the European Parliament.
12.4 As foreshadowed in its 2012 Communication,
in July the Commission proposed this Regulation, document (a),
to establish, as the second pillar of the Banking Union, uniform
rules and a uniform procedure for the resolution of credit institutions
and certain investment firms, in the framework of a Single Resolution
Mechanism (SRM) and a Single Bank Resolution Fund. The draft Regulation
builds on the BRRD and sets out to a degree how the BRRD should
be applied within the participating Member States. There are two
main elements of the SRM proposal:
- transfer of responsibility
for bank resolution from the national to the EU level in participating
Member States; and
- creation of a Single Bank Resolution Fund to
assist in the financing of resolutions under the SRM.
12.5 In this Opinion, document (b), the ECB comments
on the draft Regulation on a SRM. It fully supports establishing
the SRM. The ECB considers both the SRM and the SSM to be essential
parts of the integrated financial framework of the Banking Union,
which will help break the link between banks and sovereigns in
the Member States concerned and reverse the current process of
financial market fragmentation.
12.6 Earlier this month, we again considered
the SRM proposal and we noted that:
- it seemed possible that the
Presidency would attempt to secure a general approach on the draft
Regulation, document (a), at the ECOFIN Council on 10 December;
and
- we were being asked to give the Government a
free hand, by clearing the document from scrutiny, to acquiesce
in such a general approach if it deemed it appropriate.
12.7 However, we said that:
- we had received Government
responses to important questions, asked in early September, so
late that we had been unable to analyse them satisfactorily before
the Council meeting, let alone consider whether we wished to recommend
a timely debate;
- so in these circumstances we
would not clear the document from scrutiny and we advised the
Government that, given the importance of the issues at stake,
we would regard an abstention in a vote on a general approach
at the forthcoming Council as merely a token regard for parliamentary
scrutiny;
- we wanted the Government to report back, promptly,
on the outcome of the Council, before we would consider further
scrutiny of the document; and
- regarding the ECB Opinion, document (b), since
it related so closely to aspects of the draft Regulation still
being negotiated, we would hold it also under scrutiny.[45]
The Minister's letter
12.8 The Financial Secretary to the Treasury
(Sajid Javid), writes to update us on the discussions of the
SRM at the ECOFIN Council on 10 December. He says that as a result
of the discussions it is clear that the three basic elements of
any proposal are likely to be as follows. First, the Minister
reports that there remains a consensus among participating Member
States that the new Single Resolution Board (an EU agency, which,
as originally proposed would support the Commission in the latter's
task of deciding on resolution or insolvency for a troubled institution)
would take most decisions on bank resolution, with the involvement
of EU institutions limited only to those decisions that demonstrably
cannot be taken by an EU agency under existing case law. He adds
that the Board's detailed decision-making arrangements remain
to be agreed.
12.9 Secondly, the Minister says that the scope
of the SRM will continue to be that all banks are to be covered
within the overall mechanism, with national resolution authorities
playing a larger role in smaller banks and in resolutions where
no external funding is required.
12.10 Thirdly, the Minister tells us that:
- some Member States have proposed
moving some elements of the proposal to an intergovernmental agreement
between the participating Member States, in particular the mutualisation
of resolution funding;
- Ministers will meet to finalise the scope of
this agreement and how it will interact with the SRM's provisions;
and
- there was broad agreement that an intergovernmental
agreement would include provision for participating Member States
to compensate non-participating Member States for any liabilities
they incurred (including through the EU budget) as a result of
EU institutions performing tasks under this Regulation.
12.11 The Minister continues that:
- the Government will continue
to approach negotiations constructively and will be prepared to
support an agreement provided it is consistent with the overall
framework for dealing with banking failure in the BRRD (which
remains subject to discussion in trilogues) and provides for fair
and equal treatment of non-participating Member States;
- it has made substantive progress in securing
equal treatment of resolution authorities in participating and
non-participating Member States and will continue to push for
full equal treatment in any general approach;
- as part of this, the Government is seeking stronger
non-discrimination requirements, provisions for close cooperation
between the SRM's authorities and resolution authorities in non-participating
Member States and symmetry in application of the EBA's binding
powers on all resolution authorities across the single market;
- the Presidency now plans to seek agreement on
a general approach on the SRM Regulation and to finalise the scope
of the intergovernmental agreement between the participating Member
States at a special ECOFIN Council (probably on 18 December);
and
- discussions to finalise texts, including with
the European Parliament, would then continue in the New Year.
12.12 The Minister concludes by saying that:
"I appreciate that these are significant issues.
But it would greatly help the Chancellor and I at next week's
negotiations if we had your support for an agreement which secures
UK interests and, in particular, ensures no budget liability for
the UK and provides for equal treatment for participating and
non-participating Member States."
Conclusion
12.13 We refer to the Minister's letter of 3
December, which we reported on 4 December,[46]
and note the revisions to the proposed Regulation to accommodate
the Meroni doctrine by curtailing the discretion of the Board
on questions of policy. We also note the (second) Opinion on this
of the Council Legal Service,[47]
and ask the Minister to confirm that, as a result of the revisions,
the Legal Service is content that the delegation of power to the
Board is now lawful.
12.14 We thank the Minister for this prompt account
of the 10 December ECOFIN Council. We note his plea for our support
for an agreement which secures UK interests, which we take to
be a request for clearance of the documents from scrutiny. Given
the continuing uncertainty over the likely final form of the SRM
we are not prepared to give that clearance. We recognise, however,
the fast moving nature of the negotiations on this matter and
are prepared to grant a waiver, in terms of the Scrutiny Reserve
Resolution, enabling the Government to support a general approach,
on the following conditions:
- that the Government only accepts
an Article 114 TFEU legal base if the Regulation can be demonstrated
to contribute "to an on-going harmonisation process in the
field of financial services"[48]
across the EU, rather than solely within the eurozone. Otherwise,
this proposal could set a dangerous precedent for the legal base
of future eurozone measures. This point was not addressed in the
(first) Council Legal Service Opinion[49]
— should the Minister vote in favour of the proposal based
on Article 114 TFEU we expect him to provide the necessary legal
justification;
- that there is clear and unambiguous limitation
of the Commission's role. We note that in his letter of 3 December
the Minister says "the proposed conferral of executive power
on the Commission using secondary legislation would be unprecedented".
Should the Minister vote in favour of the proposal we expect
him to provide a justification of why the powers conferred on
the Commission are no longer "unprecedented", but are
consistent with the EU Treaties;
- that an intergovernmental agreement be limited
to the Single Resolution Fund and that it does not regulate the
use of EU institutions outside the framework of EU law, as was
the case with the intergovernmental Treaty on Stability, Coordination
and Governance in the Economic and Monetary Union; and
- that the equality of treatment for participating
and non-participating Member States remains secured.
12.15 We look forward to a further report on
developments in the Council negotiations — meanwhile the
documents remain under scrutiny.
42 (34217) 13682/12, (34218) 13683/12, (34231) 13854/12:
see HC 86-xiv (2012-13), chapter 1 (17 October 2012), HC Debs,
6 November 2012, cols. 805-833 and HC 86-xxxiv (2012-13), chapter
14 (6 March 2013). Back
43
(34012) 11066/12 + ADDs 1-2 (34560) 17849/12: see HC 86-vii (2012-13),
chapter 7 (4 July 2012), HC 86-xxx (2012-13), chapter 5 (30 January
2013), HC 83-iv (2013-14), chapter 15 (5 June 2013) and HC 83-v
(2013-14), chapter 15 (12 June 2013). Back
44
See http://register.consilium.europa.eu/pdf/en/13/st11/st11148-re01.en13.pdf. Back
45
See headnote. Back
46
Ibid. Back
47
14547/13, 7 October 2013. Back
48
See para 30 of the Opinion of the Council Legal Service, 13524/13,
11 September. Back
49
Ibid. Back
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