Charlie McConalogue (Donegal North East, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak on behalf of Fianna Fáil to the motion approving the terms of the intergovernmental agreement on the transfer and mutualisation of contributions to the Single Resolution Fund. The Single Resolution Fund is an integral part of the banking union process that is designed to break the link between weak banks and taxpayer bailouts. Fianna Fáil supports the concept of banking union while maintaining our belief that Europe has still not made good on the commitment it entered into in June 2012 when it pledged to break the link between bank debt and sovereign debt.

Until such time as this is resolved, Ireland must continue to press its case for meaningful relief from the debt which was taken on to rescue the banks. In the short time available for debate on this motion I will focus on three aspects of it: the size of the Single Resolution Fund, the period over which it is being implemented and the ultimate need for treaty change to underpin the process.

As my colleague, Deputy Michael McGrath, has pointed out, the Single Resolution Fund is likely to be too small for the purposes for which it is intended. It is also not being implemented soon enough and is likely to suffer from political difficulties relating to its implementation. I will start by addressing the size of the fund. I concur with the principle that the Single Resolution Mechanism should in so far as possible be constructed with the intention of minimising the recourse to national taxpayers' money. This would ensure that where a regional banking crisis develops, possibly for reasons outside the control of the national government, that country will not be overwhelmed by the cost of rescuing its banking sector. As it stands, banks will contribute to the costs of resolution through the collection of levies, and where there is a shortfall, through ex postlevies.

The initial target level of funding for the Single Resolution Fund is €55 billion, to be achieved by 2024. This is the estimated value of 1% of deposits of all institutions authorised by the relevant national authorities. However, the eurozone banking sector is more than three times the size of the wider eurozone economy. In that context, will the resolution fund be large enough to underpin the €33 trillion eurozone banking sector? The Open Europe organisation has estimated that a fund would need to be around €500 billion to €600 billion to provide a viable backstop for a banking sector this size in line with international comparisons and standards.

One of the most concerning aspects of the process is that so-called national compartments of funding for resolution will not be phased out until 2024. This is a very long period when individual countries will be largely left to their own devices for resolving a banking crisis within their own borders. It is a long way short of the notion of banking union and mutual support across countries. There is every chance that a banking crisis will hit an individual member state before full introduction of the Single Resolution Fund.

The final issue I want to touch on is the potential need for treaty change to underpin the process for rescuing banks. Under the current process, the single resolution board will make the initial assessment of whether a bank needs to be put into resolution. It has the task of putting in place the rescue plan and deciding whether a call will be made on the Single Resolution Fund. As current EU treaty provisions preclude the delegation of policy-making powers to a subsidiary body such as the single resolution board, it will be necessary for the European Commission to take the final decision to trigger resolution and use the fund. This is where potential political difficulties arise. There is still a mindset whereby European Commission members act primarily in what they perceive to be their national self-interest. Any proposal for a streamlined process to remove the final decision-making power from the European Commission and vest it in the single resolution board will almost certainly meet with resistance from the German authorities. If necessary, Ireland should seek to be build a consensus for treaty change to remove this potential roadblock to the successful implementation of the Single Resolution Mechanism. Unless this happens, it is likely that the less than perfect system being presented to us will remain in place for some time to come.

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