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Directive of the European Parliament and of the Council on Banking Union 06-06-2012

Directive of the European Parliament and of the Council on Banking Union 06-06-2012

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Published by: TheoTheodorides on Nov 10, 2012
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EN EN
EUROPEAN COMMISSION
Brussels,XXX COM(2012) 280/3Proposal for a
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILestablishing a framework for the recovery and resolution of credit institutions andinvestment firms and amending Council Directives 77/91/EEC and 82/891/EC,Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and2011/35/EC and Regulation (EU) No 1093/2010
(Text with EEA relevance){SWD(2012) 166}{SWD(2012) 167}
 
EN
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EN
EXPLANATORY MEMORANDUM1. CONTEXT
 
OF
 
THE
 
PROPOSAL
The financial crisis severely tested the ability of national and Union-level authorities tomanage problems in banking institutions. Meanwhile, financial markets in the Union havebecome integrated to such an extent that domestic shocks in one Member State may be rapidlytransmitted to other Member States.Against this background, the Commission issued a Communication
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in October 2010 settingout plans for a Union framework for crisis management in the financial sector. Theframework would equip authorities with common and effective tools and powers to tacklebank crises pre-emptively, safeguarding financial stability and minimising taxpayer exposureto losses in insolvency.At international level, G20-Leaders have called for a “review of resolution regimes andbankruptcy laws in light of recent experience to ensure that they permit an orderly wind-downof large complex cross-border institutions.”
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In Cannes in November 2011, they endorsed theFinancial Stability Board (FSB) "Key Attributes of Effective Resolution Regimes forFinancial Institutions" ('Key Attributes")
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. These set out the core elements that the FSBconsiders to be necessary for an effective resolution regime. Their implementation shouldallow authorities to resolve financial institutions in an orderly manner without taxpayerexposure to loss from solvency support, while maintaining continuity of their vital economicfunctions. In June 2012, the G20 is set to start work on evaluating progress in implementingthese provisions in the different jurisdictions.In June 2010, the European Parliament adopted an own-initiative report on recommendationson cross-border crisis management in the banking sector
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. It stressed the need for a Union-wide framework to manage banks in financial distress and recommended moving towardgreater integration and coherence in the resolution requirements and arrangements applicableto cross-border institutions. In December 2010, the Council (ECOFIN) adopted conclusions
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 calling for a Union framework for crisis prevention, management and resolution. Theconclusions stress that the framework should apply in relation to banks of all sizes, improvecross-border cooperation and consist of three pillars (preparatory and preventative measures,early intervention, and resolution tools and powers). These should "aim at preserving financialstability by protecting public and market confidence; putting prevention and preparation first;providing credible resolution tools; enabling fast and decisive action; reducing moral hazardand minimising to the fullest possible extent the overall costs to public funds, by ensuring fairburden sharing among the financial institutions' stakeholders; contributing to a smoothresolution of cross border groups; ensuring legal certainty; and, limiting distortions of competition."In addition, a high-level group is due to report to the Commission in the second half of 2012on whether, on top of on-going regulatory reforms, structural reforms of Union banks would
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COM (2010) 579 final
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 G20 Leaders' declaration of the Summit onfinancial markets and the world economy, April 2009.
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 http://www.financialstabilityboard.org/publications/r_111104cc.pdf 
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(2010/2006(INI))
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17006/1/10
 
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EN
strengthen financial stability and improve efficiency and consumer protection
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. The group'sproposals will be assessed separately upon completion of the work.Finally, on 30 May 2012 the Commission indicated that it will initiate a process to "map outthe main steps towards full economic and monetary union (including), among other things,moving towards a banking union including an integrated financial supervision and a singledeposit guarantee scheme"
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.
2. RESULTS
 
OF
 
CONSULTATIONS
 
WITH
 
THE
 
INTERESTED
 
PARTIES
 
AND
 
IMPACT
 
ASSESSMENTS
In the period between 2008 and 2012 the Commission services organised a number of consultations and discussions with experts and key stakeholders concerning bank recoveryand resolution. As the last public consultation before the adoption of the proposal, aCommission Staff Working Paper describing in detail the potential policy options underconsideration by the Commission services was published for consultation in January 2011.The consultation ended on the 3
rd
of March 2011. On one of the resolution tools, the so calledbail-in or debt write down tool, targeted discussions were organised with experts fromMember States, banking industry, academic world and legal firms in April 2012. Thediscussions concerned the key parameters of the debt write-down tool, including in particularthe resolution triggers, the scope of bail-in, its potential minimum level, resolution of groupsas well as grandfathering. Documents related to public consultations can be found on thewebsite of the European Commission.
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 On this basis, the Commission has prepared the attached legislative proposal. TheCommission services have also prepared an Impact Assessment (IA) for the proposal, whichcan be found on the website of the European Commission.
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 The comments by the Impact Assessment Board (IAB) expressed in their first and secondopinion in May and June 2011 have been taken into account. In addition, the text of the IAhas been updated reflecting latest developments in international fora as well as incorporationof results of the discussions on the bail-in tool that took place in April 2012. Concretely, therevised IA improves the presentation of the legal and institutional context by describing theresponsibilities of national supervisors and resolution authorities and the relationshipsbetween the proposal for bail-in and the planned CRD IV requirements. The text of the IAbetter explains the content of options, in particular the one related to the bail-in/debt-writedown tool. Also the impacts of the bail-in tool on the costs of funding for banks and non-financial firms (SMEs) have been added. A section related to the coherence of the proposalwith other regulatory proposals has been completed. Finally, monitoring and evaluationarrangements were further clarified by singling out the most relevant indicators to bemonitored.
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