The European Parliament and the Council have reached a provisional agreement on the proposed Single Resolution Mechanism (SRM) for the Banking Union that should stabilise financial system and facilitate taking measures towards banks in difficulties.
Once fully operational in late 2014 it will see the European Central Bank (ECB) directly supervise banks in the euro area and in other member states which decide to join the Banking Union.
The Single Resolution Mechanism would ensure that if a bank faced serious difficulties, its resolution could be managed efficiently with minimal costs to taxpayers and the real economy.
“Political agreement on the single resolution mechanism completes our banking union. This will strengthen confidence and stability in the financial markets and help restore lending to the economy,” said President of the European Commission, José Manuel Barroso.
Internal Market and Services Commissioner Michel Barnier said the “compromise allows us to complete the architecture of the banking union for the eurozone.”
“Backed by an appropriate resolution funding arrangement and an acceptable decision-making process this second pillar of the banking union will allow bank crises to be managed more effectively,” Barnier said.
“Together with the reforms to the financial sector for all 28 countries, the completed banking union will put an end to the era of massive bailouts” the commissioner added.
The agreement needs to be adopted jointly by the European Parliament and by the EU member states in the Council (which votes by qualified majority). It is expected that the European Parliament will vote this legislation in plenary in April, while the Council will formally adopt it subsequently.
The SRM would enter into force on 1 January 2015, whereas bail-in and resolution functions would apply from 1 January 2016, as specified under the Bank Recovery and Resolution Directive.
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