Lithuanian Presidency reaches agreement on Single Resolution Mechanism

Reaching a long-awaited deal on the Single Resolution Mechanism, a key pillar of the Banking Union, Lithuania has concluded its Presidency of the ECOFIN Council on December 18 in Brussels. This agreement paves the way for negotiations with the European Parliament with a view to adopting the regulation before the end of the current parliamentary term, as requested by the European Council. The SRM would enter into force on January 1, 2015.

Reaching a long-awaited deal on the Single Resolution Mechanism, a key pillar of the Banking Union, Lithuania has concluded its Presidency of the ECOFIN Council on December 18 in Brussels. This agreement paves the way for negotiations with the European Parliament with a view to adopting the regulation before the end of the current parliamentary term, as requested by the European Council. The SRM would enter into force on January 1, 2015.

“We have laid another cornerstone for the financial stability of Europe today. With the agreement on Single Resolution Mechanism settled, the construction of Banking Union is almost complete. This is indeed the highlight of the Lithuanian Presidency,” said Rimantas Šadžius, Lithuanian Finance Minister and Chair of the ECOFIN Council.

The Minister expressed gratitude to all parties involved for the constructive approach during the Lithuanian Presidency and symbolically handed over the Presidency to Greece.

The agreement goes further towards breaking the link between the banks and sovereigns and reducing European financial market fragmentation as well as adds fundamental addition to the Bank recovery and resolution and Deposit guarantee schemes directives also just agreed in recent days.

“The Lithuanian Presidency has consistently and with all its efforts followed its determination to build credible Europe, and the agreement on the Single Resolution Mechanism is one of the most remarkable achievements in building strong and sound Banking Union,” said Minister Šadžius.

The agreement reached consists of a draft Regulation, based on the Commission proposal, and a decision to negotiate an intergovernmental agreement by March 1, 2014.

The intergovernmental agreement includes specific provisions on the setup of the single resolution fund. The single resolution fund will be filled by bank levies and will initially consist of national compartments that will be gradually mutualised over ten years.

The Council also issued a statement on the design of a backstop to the single resolution fund.

Lithuanian Presidency and the Banking Union
The Council under the Lithuanian Presidency has approved legislation setting up the Single Supervisory Mechanism, which creates a new system of financial supervision comprising the European Central Bank and the national competent authorities of participating EU countries.

The Lithuanian Presidency has also reached agreement with the European Parliament on two separate components of the Banking Union: Bank Recovery and Resolution Directive (establishes a framework for the recovery and resolution of banks and investment companies while safeguarding the taxpayers’ money) and Deposit Guarantee Schemes (aimed at ensuring sufficient financial means in the Schemes funds and fast pay-outs to depositors).