Bank resolution plan breaches EU rules, lawyers say
-
Bank resolution plans breach EU law warns lawyers (Photo: Joel Bombardier)
By Benjamin Fox
The prospects of swift agreement on the next stage of an EU banking union have been dealt a blow after lawyers warned that the plans would breach EU law.
The single resolution mechanism tabled by the EU's financial services commissioner, Michel Barnier, in July would establish a board tasked with resolving ailing banks alongside a common fund to cover the costs of bank resolution.
Join EUobserver today
Become an expert on Europe
Get instant access to all articles — and 20 years of archives. 14-day free trial.
Choose your plan
... or subscribe as a group
Don't miss out on
Our exclusive news stories and investigations. Influential. Investigative. Independent.
Why join?
Watch our founder Lisbeth Kirk explain the reasons in this 30-second video.
Already a member?
However, in a leaked paper drafted for governments by the Council of Ministers' legal service, officials warned that giving the board control over a resolution fund worth up to €55 billion together with the power to wind-up banks would see it “allocated a large number of powers that can be overall regarded as of a purely executive nature.”
It adds the bill was “not specific enough to ensure that the board will not encroach upon the exclusive power of the institutions to establish the resolution policy of the Union.”
Solving the problem would require the precise powers for the board to be spelt out in the proposal or the extension of the commission's powers to intervene, according to the lawyers.
The document, dated 7 October, which is the second opinion on the proposal by the legal service, hinges on the so-called Meroni case from 1958 which forbids the commission from delegating powers involving a large amount of discretion to external agencies.
The paper will come as a blow to the commission, which is anxious to secure agreement on the bill between MEPs and ministers before next May's European elections.
MEPs will adopt their position on the proposal in November but ministers have made little progress.
Germany leads a group of countries who are concerned at the prospect of handing over powers to intervene in their banking sector to the EU.
Eurozone ministers are expected to discuss the proposal at a meeting next week in Luxembourg.
