2017年-CEPS欧洲政策研究中心_Uneven_progress_in_implementing_cross_10页_755kb

Summary of "Uneven progress in implementing cross-border bank resolution in the EU"

Core Content

The document discusses the implementation of cross-border bank resolution in the EU, highlighting the uneven progress and the challenges in achieving a consistent and harmonised approach across member states. Four recent bank resolution cases in the EU—Banco Popular (Spain), Banca Monte dei Paschi di Siena (MPS), Veneto Banca, and Banca Popolare di Vicenza (PBVi)—demonstrate the varying application of the EU's crisis management framework, raising concerns about the effectiveness and fairness of the system.

Main Points

1. The EU Crisis Management Framework

• The BRRD (Bank Recovery and Resolution Directive) and SRBR (Single Resolution Board Regulation) were key milestones in establishing a common EU-wide framework for bank resolution.
• The BRRD introduced prompt corrective action (PCA), recovery plans, and a range of resolution tools, including bail-in, sale of banks, and the creation of bad banks.
• The SRBR created the Single Resolution Fund (SRF) and gave the Single Resolution Board (SRB) powers to resolve banks, potentially wiping out shareholders and management.

2. Implementation Challenges

• The framework is still incomplete and inconsistent, with many national laws and practices affecting the implementation.
• The capital requirements directive (CRD IV) leaves significant discretion to member states, leading to divergent regulatory standards.
• Non-performing loans (NPLs) remain a major issue, with some countries (e.g., Italy, Portugal) having NPL ratios far above the EU average, affecting lending and economic activity.

3. Resolution Tools and Their Application

• Resolution tools include liquidation, bail-in, creation of bad banks, and state support.
• The Single Resolution Fund (SRF) is a key mechanism for funding resolution actions, but its effectiveness is limited by national differences.
• The SRB has the authority to resolve banks, but in some cases, it refers resolution to national authorities, as seen in the Venetian banks case.

4. State Aid and Legal Issues

• The EU prohibits state aid, but exceptions exist, such as Art. 107.3b, which allows support during serious economic disturbances.
• The use of state aid in resolving the Venetian banks was controversial, as it involved compensating subordinated debt holders, raising questions about the principle of no creditor worse-off (NCWO).

5. Complexity and Governance

• The complexity of the resolution framework is exacerbated by national differences in governance, risk management, and accounting standards.
• The no creditor worse-off (NCWO) principle and bail-in hierarchy are still under development, with uncertainty about how they are applied in practice.
• The harmonisation of insolvency frameworks across the EU is not yet fully achieved, and this affects the fair treatment of creditors during bank resolution.

6. Recent Cases and Outcomes

• Banco Popular (Spain): Resolved through SRB bail-in, with shareholders and subordinated debt holders losing significant value.
• MPS (Italy): Underwent precautionary recapitalisation and bail-in, with €5.4 billion of state support.
• Veneto Banca and BPVi (Italy): Resolution was left to national authorities, with state support and compensation of subordinated debt holders.
• All four banks had cross-border operations, indicating the complexity of managing large, multinational institutions under EU rules.

Key Information

• The Single Supervisory Mechanism (SSM) and Single Resolution Board (SRB) were established to improve supervisory coordination and resolution efficiency, but convergence is still ongoing.
• State-owned banks and public support play a significant role in EU banking, with 18% of financial sector assets controlled by states.
• The deposit guarantee system (DGS) is still under development, with many countries not fully pre-funded.
• Competition policy is a key concern, as bank consolidation may lead to too big to fail (TBTF) banks, but harmonisation of the banking sector is necessary to prevent this.

Conclusion

The EU has made progress in establishing a cross-border bank resolution framework, but implementation remains inconsistent. The divergence in national approaches and the complexity of the system raise concerns about the level playing field and the effectiveness of crisis management. The need for harmonisation and clearer rules is evident, especially regarding NPLs, state aid, and resolution procedures. The recent cases highlight the challenges in applying the framework consistently and the importance of a unified approach for future crises.

References

• Ayadi, Rym, Willem-Pieter De Groen et al. (2016), Banking Business Models Monitor 2015: Europe, Montréal: International Research Centre on Cooperative Finance (IRCCF) of HEC Montréal.
• De Groen, Willem-Pieter (2017), “Carving out legacy assets: A successful tool for bank restructuring?”, CEPS Policy Brief, CEPS, Brussels, March.
• Lannoo, Karel (2014), ECB Banking Supervision and Beyond, CEPS Task Force Report, CEPS, Brussels.
• Single Resolution Board (SRB) (2016), MREL: Approach taken in 2016 and next steps.
• Valiente, Diego (2017), “Harmonising Insolvency Laws in the Euro Area: Rationale, stocktaking and challenges”, CEPS Policy Brief, CEPS. Brussels, December.