MEP’s voted on the 17th to establish their position on critical details of the single resolution system. During yesterday’s Parliamentary hearing, ECB President Mario Draghi said, “I urge you and the Council to swiftly set up a robust Single Resolution Mechanism, for which three elements are essential in practice: a single system, a single authority, and a single fund”, emphasizing the need for clarity and speed in deploying a resolution decision.
- The Commission will act as resolution authority with the unique power to trigger the resolution process.
- Further Commission action would then be subject to approval by the Resolution Board, largely comprising national representatives.
- A European resolution fund will be set up within 10 years, eventually composed of bank contributions amounting to 1% of deposits. In the interim period, MEP’s suggest that the fund will be financed by loans from a “European public instrument” e.g. the European Stability Mechanism and/or the EU budget itself.
- Parliamentary approval will be needed to appoint the Executive and Deputy Executive Director of the Resolution Board. Transparency and access rules will be put in place.
The MEP’s vote brings the Parliament closer to the German-based compromise reached by EU finance ministers on the 11th. Several points of friction still remain: the Parliament’s position fails to address German concerns with respect to the legality of the SRM within the framework of the EU treaties, and still advocates using the ESM as a credit backstop. National area representatives met last night, on the eve of today’s EU leader summit, to finalise their position on the crucial funding details. It seems clear that the two sides are drawing closer, irrespective of the final details, agreement and enactment would mark the largest transfer of sovereignty in the Euro-zone since the establishment of the single currency.