Out-Law News | 16 Apr 2014 | 12:42 pm | 1 min. read
The SRM is one of three measures MEPs have backed designed to ensure taxpayers do not have to foot the bill for failing financial institutions, a European Parliament statement said.
Under the Directive banks would have to contribute to a €55 billion bail-in fund, to be developed over eight years, which could be used to bail out failing banks.
MEPs also backed proposals which would make shareholders and creditors first in line to absorb any losses a failing bank might incur, before outside sources of finance could be called upon.
In addition, EU member states will be obliged to set up their own bank-financed schemes to reimburse guaranteed deposits of up to €100,000, should a bank be unable to do so.
The moves are part of wide-ranging reforms of the European banking system proposed by the European Commission to create a European banking union following the recent banking crisis which led to taxpayers' money being used to rescue failing banks. As part of the reforms, the European Central Bank (ECB) will become Europe's single banking regulator later this year. The ECB is currently conducting an asset quality review of some of Europe's largest lenders, designed to establish a clear picture of European banks' riskier portfolios
Following the vote in favour of the SRM, EU Internal Market and Services Commissioner Michel Barnier said: “Today, the European Parliament has adopted three key texts to complete the legislative work underpinning the banking union. Thanks to the assiduous work of the co-legislators, we have turned the idea of a banking union into reality in less than two years. The EU has lived up to its commitments: the banking union completes the economic and monetary union and ensures taxpayers will no longer foot the bill when banks face difficulties."
"Not only does the banking union help to restore confidence in the banking sector but it also ensures a truly European system of supervision and resolution of banks when they fail," said Barnier. "With today's vote, we remain on track for the operational work to start later this year."
Representing the Council of the EU, Greek Deputy Prime Minister and Foreign Minister Evangelos Venizelos said that the creation of a European banking union within two years had been a "Herculean task" which would allow Europe to emerge stronger from the financial crisis. He added: "It is a major step towards the completion of a true Economic and Monetary Union based on greater integration and solidarity in the euro area. And the Single Rule Book, the foundation on which the Banking Union has been built, will deliver greater stability to the whole of the EU and its internal market”.