The European Commission had recently adopted a new piece of legislation regarding the Single Resolution Mechanism. To get a better idea about its role in the Banking Union architecture, have a look at the picture below:
The legislative proposal in question will serve as a basis for the calculation of contributions to be paid by each individual bank into the Single Resolution Fund. The original aim of the initiative was to make the biggest banks with largest risk potential pay amounts proportionate to these factors. So far so good.
The document has been passed onto the European Parliament which will now take a closer look at it and possibly change some provisions. Already before the MEPs got their hands on the final proposal, some of them have voiced their concerns in an open letter addressed to the former Commissioner Barnier.
The main points of criticisms include:
- Unfortunate choice of calculation basis: Instead of quantifying the contributions in line with the risks each bank represents, the proposal focuses on a bank’s total assets;
- Putting a veil over the real risks: The proposal provides for the “netting” of derivative;
- Distortion of EU-level-playing field: The paid amount will be tax deductible in some EU countries and not in others.
Regarding the timeline for this piece of legislation, Sven Giegold, Green MEP and member of the EP’s ECON Committee, said: “We should be seeking to get these proposals right, rather than rushing them through in their current imbalanced form.”