9 Banking Union: single resolution mechanism
| (a)
(35195)
12315/13
COM(13) 520
(b)
(35512)
15863/13
—
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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)
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| Legal base
| (a) Article 114 TFEU; co-decision; QMV
(b) —
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| Department
| HM Treasury
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| Basis of consideration
| Minister's letter of 28 February 2014
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| Previous Committee Reports
| (a) HC 83-xiii (2013-14), chapter 19 (4 September 2013), HC 83-xxiii (2013-14), chapter 10 (4 December 2013), HC 83-xxv (2013-14), chapter 12 (18 December 2013) and HC 83-xxvii (2013-14), chapter 5 (15 January 2014)
(b) HC 83-xxiii (2013-14), chapter 10 (4 December 2013), HC 83-xxv (2013-14), chapter 12 (18 December 2013) and HC 83-xxvii (2013-14), chapter 5 (15 January 2014)
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| Discussion in Council
| 18 December 2013
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| Committee's assessment
| Legally and politically important
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| Committee's decision
| Not cleared; further information requested
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Background
9.1 In September 2012 the Commission
published a Communication about establishing a "Banking Union"
and two draft Regulations concerning supervision of the banking
sector.[26] 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).
9.2 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.
9.3 Also relevant to establishing the
Banking Union is a 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.[27]
In June 2013 the ECOFIN Council agreed a general approach on the
BRRD[28] for discussions
with the European Parliament. Following those discussions a deal
was concluded with the European Parliament on 12 December 2013.
9.4 As foreshadowed in its 2012 Communication,
in July 2013 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.
9.5 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.
9.6 On 15 January we continued our scrutiny
of the SRM proposal. We reported that:
· we had heard about the ECOFIN
Council of 18 December 2013 adopting a general approach on the
proposal, which had been endorsed by the December 2013 European
Council and which was now to be considered in trilogue discussions;
· we noted the Government's
claimed negotiation successes;
· much, however, seemed to
depend on both the result of the Government's case in the Court
of Justice in relation to the Short Selling Regulation, Regulation
(EU) No. 236/2012, and how the trilogues developed;
· we were asking to hear in
due course how these matters were turning out; and
· meanwhile the documents remained
under scrutiny.[29]
9.7 On 22 January the Court of Justice
issued its judgement on the Short Selling Regulation case.[30]
In the judgement the Court:
· found that, contrary to the
UK's arguments, the restrictions on the (European Securities and
Markets Authority (ESMA)'s powers to intervene in short selling
in Article 28 are sufficiently precisely defined and are therefore
compliant with the requirements in Case 9/56 of Meroni v High
Authority; and
· clarified additionally that,
regarding the UK's argument that Article 28 does not amount to
a harmonising measure under Article 114 TFEU, the use by the ESMA
of its intervention powers to address financial market or systemic
stability risks would amount to a harmonising measure across the
EU.
The Minister's letter 28 February 2014
9.8 The Financial Secretary to the Treasury
(Sajid Javid) writes now to tell us about the Government's view
on the implications of this Court of Justice judgement for its
approach towards the SRM. He says that preliminary analysis by
legal advisers suggests two areas where the judgement could impact
on the SRM.
9.9 The Minister, telling us that the
first is the legal base for the proposal, that is Article 114
TFEU, says that:
· the judgement tends to support
the view that the Court will afford the legislator a wide margin
of discretion in the choice of legal base in this area;
· it seems probable that the
Court would regard the SRM proposal as part of an overall scheme
of harmonisation, having particular regard to the legal framework
to be established for all Member States under the BRRD; and
· the Court is also likely
to view it as something that both (further) harmonises national
laws, by removing certain discretions that would otherwise be
available to the participating Member States under the BRRD and
provides a scheme under which the process of harmonisation will
be implemented through the new framework of decision-making by
supra-national authorities.
9.10 The Minister says that the second
area relates to the proposed conferral of various powers on the
new EU agency to be established under the SRM, the Single Resolution
Board (SRB). He comments that:
· in its judgment the Court
reaffirmed the existence of the Meroni principles;
· it appears, however, to have
adopted a relatively relaxed approach to the application of these
principles in practice;
· nevertheless, as a matter
of law, the Court made clear that it remains the case that tasks
conferred on agencies need to be well-framed to ensure that their
executive powers are sufficiently limited by the appropriate
conditions and criteria; and
· the Government intends, therefore,
to continue to scrutinise carefully the precise framing of powers
for the SRB in the SRM proposal with a view to ensuring that the
powers are sufficiently well-framed so as to ensure compliance
with the Meroni principles.
9.11 The Minister concludes that, in
practice, it currently appears unlikely that the judgement, in
and of itself, will necessitate major changes to the general approach
text agreed by the ECOFIN Council at the end of last year.
Conclusion
9.12 We are grateful to the Minister
for this assessment of the implications for the SRM proposal of
the Court of Justice's judgement. We wish to hear in due course
how this and other matters are turning out in the trilogue discussions
of the proposal. Meanwhile the documents remain under scrutiny.
26 (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
27
(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
28
See http://register.consilium.europa.eu/pdf/en/13/st11/st11148-re01.en13.pdf. Back
29
See headnote. Back
30
See http://curia.europa.eu/juris/liste.jsf?num=C-270/12. Back
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