Bail-In by 2016?

On 21 May 2013, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published a press release detailing its negotiating position with respect to certain elements of the proposed Recovery and Resolution Directive (RRD).

The negotiation position was approved by 39 votes to 6 and states that:

  • the “bail-in” scheme should be operational by January 2016 at the latest;
  • insured deposits (i.e. those below EUR 100,000) can never be subject to bail-in;
  • uninsured deposits (i.e. those above EUR 100,000), can only be subject to bail-in “as a last resort”;
  • funds from deposit guarantee schemes will not be capable of being diverted in order to help pay for bank resolution measures;
  • taxpayer money can only be used to guarantee liabilities or assets, take a stake in a failing bank or institute temporary public ownership and only after all capital has been written down to zero and taxpayer intervention is necessary in order to:
    • prevent “significant adverse effects on financial stability”; or
    • protect the public interest;
  • bank-financed resolution funds must be established at a national level and must have a capacity equal to 1.5% of the amount of deposits of the participating banks within 10 years of the entry into force of the RRD; and
  • resolution funds will not be obliged to lend to each other.

The press release notes that the EU Council must now adopt its negotiating position, after which trialogue discussions between the Council, the Commission and the Parliament will commence.

This piece is cross-posted from Recovery and Resolution Plans with permission.