After negotiations that lasted 12 hours Europe’s Finance Ministers, during the ECOFIN meeting agreed on one of the main pillars of the future banking union – the single resolution mechanism (SRM) regulation.
The SRM will consist of a resolution authority (board) and a single resolution fund. Its aim is to ensure the orderly resolution of failing financial institutions with minimal impact on the taxpayer and the real economy.
The development is regarded as an important step for the Eurozone, as the close monitoring of the European banking system by the European Central Bank is expected to restore the banks’ confidence between them.
Restoring credibility is also beneficial for countries of the South that have been harshly hit by the restricted cash flow to small and medium sized businesses and households.
The agreement reached consists of the general approach for the SRM regulation and a decision that the euro area member states and those non euro area countries that wish to participate will conclude an intergovernmental agreement on the functioning of the single resolution fund.
The Ministers also agreed on the terms of reference for the future intergovernmental agreement. They also adopted a statement by the Eurogroup and ECOFIN Ministers on the SRM backstop.
The general approach enables the Presidency of the Council to begin negotiations on the SRM regulation with the European Parliament, which will lead to its final adoption. The aim is to conclude negotiations before the end of the Parliament`s current legislature in May 2014.
The single resolution fund will apply to banks in the euro area member states and in those non-euro area countries that decide to participate.
It will enter into force on 1 January 2015. The SRM regulation will not apply until the intergovernmental agreement on the single resolution fund enters into force.
Get all the latest news and videos in your inbox. Register FREE