Single European resolution authority for failing banks ‘defensible’

The European Commission’s proposal for a single European resolution authority for failing banks is defensible, though potential conflicts of interest must be prevented, says Dutch finance minister Jeroen Dijsselbloem.

The European Union plan would bring together national regulators in a resolution board that would draw up plans for intervening at struggling banks.

The final decision to initiate the measures would rest with the European Commission, the EU’s regulatory arm.

In a letter to the Dutch parliament, Dijsselbloem, who heads meetings of euro-area finance ministers, said the commission’s “prominent role” in the plan put forward in July by Michel Barnier, the EU’sfinancial services chief, contains the potential for conflicts of interest with its other functions, such as regulating state aid and the single market.

The Netherlands seeks a resolution authority that is “as independent as possible, whereby any potential conflict of interest between the various roles of the European Commission and the European Central Bank must be prevented,” Dijsselbloem said.

European Union leaders called last year for eurozone countries to put in place joint oversight and crisis management of lenders in a bid to repair confidence in the solidity of the bloc’s banking system.

While governments have approved the project in principle, Barnier’s plan to centralise decisions on how to resuscitate or wind down an imperiled bank have met staunch opposition from Germany, which argues the the measures are illegal.

“There is no plan B,” Barnier said earlier this month.

Dijsselbloem, on behalf of the Dutch cabinet, said conflicts of interest could be resolved by limiting the role of the commission and the ECB, which is scheduled to assume oversight of eurozone banks next year, and making the Single Resolution Board an “independent body.”

Dijsselbloem said he supports Barnier’s call for a €55bn common resolution fund financed by levies on banks.