Final phase in negotiating Banking package / risk reduction measures

ABBL Published 22.06.2018

On 19 June 2018, the European Parliament’s Economic and Monetary Affairs Committee (ECON) adopted its reports on the so-called “risk reduction measures” or the 2016 “banking package”. The latter include four pieces of Commission draft legislation aiming at amending the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). These four pieces of draft legislation represent the European Union’s transposition of a number of post financial crisis rules agreed upon at the level of the Basel Committee on Banking Supervision and at the Financial Stability Board.

The ECON texts come after months of negotiations and compromise amendments on numerous technical and political issues. To pick out just a few from a Luxembourg perspective I would mention increased proportionality when it comes to MREL for smaller as well as deposit funded banks in the BRRD as well the requirements for Global Systemically Important Institutions (G-SII) to create Intermediate Parent Undertakings in the EU.

The adoption of the European Parliament’s position comes less than a month after the Council agreed its general approach on the package. Both institutions together with the European Commission will now have to hammer out a common text. These trilateral negotiations known in EU speech as “trilogues” are expected to start after the summer break and to be concluded in early 2019 in order to adopt the text at the latest at the April plenary session of the European Parliament, the last before the end of the mandate.

These two negotiating positions mark an important moment for further progress in the finalization of the banking union. Indeed further risk reduction measures have been politically linked to further risk sharing (e.g. the European Deposit Guarantee Scheme). The former is seen by some key Member States as a pre-condition for the latter. Pressure is building up to revive the dormant negotiations on the EDIS draft legislation. After many month of inactivity a meeting at the Council working group on EDIS already took place earlier this month.

 

 

By Antoine Kremer, ABBL & ALFI Head of European Affairs

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