Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I will read the briefing note. We welcome the single resolution mechanism as the next essential step in creating the banking union. We must press on to complete discussions on the single resolution mechanism by the end of the year. Taken with the SSM, the proposals will be an important step to achieving the objective of breaking the link between the bank sovereign and the banking sector. It is important that the SRM should give have a broad scope, covering all banks that have the potential to cause systemic difficulties, either within the individual member states or to the area as a whole.

We support the Commission's proposal in this regard as even relatively small distressed banks have been the source of considerable systemic difficulties. Broad scope is also important to ensure a level playing field for European banks. We strongly support the creation of a single resolution fund. It will assist in achieving the objective established by the Heads of State and Government of breaking the link between the sovereign and banking sector. The single resolution fund should have the capacity to borrow from private sources and to raise ex-postlevies from the financial sector.

It is also important that there should be clear safeguards in the event that a call on funds has fiscal implications for member states. The economic sustainability reference model, ESRM, proposal cannot be concluded until there is clarity on the backstop arrangements. It is our view that the ESM should be the clear public backstop for the single resolution mechanism, SRM. This is particularly important in the early years when the single resolution fund is being built up.

On governance arrangements, we need to strike a balanced representation in the executive board of the SRM which includes member states' interests but in constructing this, we must be careful we do not adversely affect effective resolution decision making. On timing, we should aim to have the deadline set by the European Council and reach agreement on this proposal to allow time for conclusion of trialogue negotiations with the current EU legislative term.

Not every country would share the Irish position so there will be quite a debate on this. Some countries would regard it as sufficient that the scope would apply only to the very large international European banks. In respect of the resolution fund, some countries would be of the view that rather than relying totally on a centralised European fund, each member state who is party to this should have its own resolution funds and that resolutions should be conducted by a combination of the funds in the sovereign funds rather than a centralised European fund.

There will be a debate about the backstop arrangements as well. Quite clearly, we see the ESM as the necessary backstop arrangement but there will be a view here that once the fund is built up if it is a centralised European fund, as time goes by and one has a fully funded fund, there would be no need for a backstop at that point. The question of whether one would continue with the ESM acting in a backstop role or whether after the ten-year build up of the fund, the ESM would drop out of the arrangements and the fund in effect would be strong enough to operate without a backstop, will also be up for debate. I am outlining the Irish position. There are very strong alternative views from powerful member states.