1. 10.2. Banking Union

2. The objective The creation of a safer and sounder financial sector (f.s.) A better regulation, supervision and government of the f.s. The breaking of the vicious circle between banks and public finances Making it easier for banks to lend businesses and households

3. A. Crisis prevention. The Single Resolution Mechanism will allow bank resolution to be managed more effectively through a Single Resolution Board and a Single Resolution Fund. If a bank fails, the SRM intervens, not the national resolution authorities. The ECB has taken over its new role as single supervisor in November 2014. It has already carried out a comprehensive assessment of significant banks and the balance sheets of those banks. Daniele Nouy was appointed as the first Chair of the SSM board.

4. Crisis prevention Stronger prudential requirement for more resilient banks [Capital Requirement Directive IV and the Capital Requirement Regulation. The new rules are in force since 1 January 2014. The EU has met its commitment to the G20 to implement the Basel III framework in a timely manner. Timely planning for banks in a critical condition. [The new framework requires banks to draw up recovery plans for remaining viable and resolution plans if they are no longer viable].

5. B. Early intervention Bank supervisors are accorded an expanded set of powers, if a bank faces problems. The include the possibility of dismissing the management and appointing a special manager, and prohibiting the distribution of dividends and bonuses. Other measures are requiring the bank to reduce its exposures to certain risks, increase its capital, or implementing changes to its legal and corporate structures. The ECB as single supervisor will supervise the early intervention in coordination with the Single Resolution Board and the relevant resolution authorities.

6. C. Bailouts The approved state aid measures in the form of recapitalization and asset relief measures between October 2008 and December 2012 amount to 591 billion or 4,6% of the EU GDP. If we include guarantees, this figure would amount to 1,6 trillion or 13% of EU GDP. Under the Bank Recovery and Resolution Directive [BRRD], banks’ shareholders and creditors would have to pay their share of the costs through a “bail-in” mechanism. Bank deposits in all Ms are to be guaranteed up to 100.000 euro per depositor per bank even if a bank fails.

7. A European Deposit Insurance Scheme [EDIS] National DGS can be vulnerable to large local shocks. EDIS would be established in three sequential stages: 1) a reinsurance scheme applying until 2020. 2) a co-insurance scheme until 2024 3) full insurance of depositor would fall under EDIS from 2014 onwards.

8. Before the system is operational In case of capital shortfalls, banks should raise capital on the markets. Should this not be sufficient, public money could be engaged at national level, in line with State aid rules. If this is not sufficient, the European Stability Mechanism can be used. State aid rules: A European Commission Communication set out eh updated EU crisis rules for State aid to banks during the crisis from 1 st August 2013. A “burden-sharing” system: a sound plan of recovery, recapitalization, first by the shareholders and junior creditors, second by public funding.