Big EU banks to pay up
October 21, 2014
The European Union's smallest banks, including Germany's powerful regional lenders, will contribute far less to a new resolution fund than big banking groups that dominate the industry, the bloc's executive said Tuesday.
The bailout fund, called the Single Resolution Mechanism (SRM), is a central pillar of a new banking union designed to prevent a repeat of the astronomical taxpayer bailouts implemented during the financial crisis.
The new rules dictate how much banks have to pay into the fund, which can be tapped when lenders are unable to resolve their own financial problems. The SRM will also be able to decide on closure or restructuring.
When the SRM is fully paid up, it will hold 55 billion euros ($64 billion.
'Fair' distribution of risk and liability
"The approach chosen is fair as each bank will contribute in proportion to its size and risk profile," said Michel Barnier, the EU's internal market commissioner.
Under the posited scheme, the largest banks - representing 85 percent of total eurozone assets - will pay around 90 percent of contributions to the fund. The smallest banks, or those representing 1 percent of total assets, will pay around 0.3 percent overall.
Small banks will pay a lump sum ranging between 1,000 and 50,000 euros, depending on the size of their assets and liabilities. The European Commission defines small banks as those with total assets of no more than 1 billion euros, among other criteria.
A nod to Germany
The payment scheme has been viewed as a major concession to Germany, where regional savings banks are well connected and flush with deposits.
Berlin has fought to exempt such lenders from banking union commitments as they play a key role in plying the country's small and medium-sized business sector, known as the Mittelstand, with capital.
bew/cjc (AFP, dpa)