Friday, April 25, 2014   

The EU's new bank regulatory regime - key points
(12-19 09:49)

EU finance ministers finally agreed on a new bank regulatory system under which Brussels gains new powers from member states to prevent reckless lenders from damaging the economy again.

The European Central Bank will meanwhile supervise directly the biggest of some 130 euro zone banks which account for about 85 percent of euro zone banking assets.
In line with German wishes, it will oversee the 6,000 other banks indirectly via national authorities.

Each country will be required to follow the same rules on bank supervision and closure under the ECB's aegis, establishing a single regulatory system.


* A so-called Single Resolution Mechanism is to be set up to decide whether and how to wind up failing banks.

* If a decision is made to wind up a failing bank, the national banking authorities would be in charge of carrying out the operation at the behest of the SRM. If the SRM board judges its orders are not being carried out, it can directly issue instructions to the bank concerned.

* Banks in all euro zone countries as well as in other countries that have chosen to participate in the Banking Union regime would be affected.

* A fund would also be set up, in time financed directly by the banks, to cover the costs of winding up a bank or to provide emergency liquidity.

* If banks fail, the financial burden will fall first on shareholders and creditors under a so-called 'bail-in process.’ Individual savers' deposits below 100,000 euros (US$137,000) would be safe under a deposit guarantee scheme but larger savers could lose some of their money.

* The accord will be submitted for approval to an EU leaders summit Thursday and Friday and it will then provide the basis for talks with the European Parliament. The system is due to be operational from 2015 and phased in over a period of ten years.

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