Michael McGrath (Cork South Central, Fianna Fail)
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154. To ask the Minister for Finance his views on the recently agreed single resolution mechanism for banks; if he is concerned by the size of the fund and the timetable for its creation; and if he will make a statement on the matter. [16625/14]

Michael Noonan (Limerick City, Fine Gael)
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I am of the view that the agreement on the Single Resolution Mechanism is a significant achievement that helps increase the stability of banks and the overall banking system in the participating Member States and should also significantly reduce the spill-over effects of crises into non-participating Member States  and as such will facilitate the functioning of the internal market.

As the Deputy is aware the Single Resolution Mechanism (SRM) is a centralised resolution mechanism for Member States who belong to the Single Supervisory Mechanism (SSM). Its purpose is to ensure that resolution can take place at the same level as supervision, rather than being conducted at national level.   It is considered an important contributing factor to breaking the link between the sovereign and the banking sector. 

The SRM will allow decisions to be made in a more objective and independent fashion than if they were been made by national supervisors. The proposal which has been agreed sees the SRM taking its decisions in line with the principles of resolution set out in the Bank Recovery and Resolution Directive (BRRD) in particular that shareholders and creditors should bear the costs of resolution before any external funding is granted, and private sector solutions should be found instead of using taxpayers' money. 

In relation to the Deputy's question regarding the size of the fund, the expectation is that in most scenarios, contributions by shareholders and creditors should be sufficient to finance resolution. If exceptionally, additional resources were needed, the Single Resolution Fund with a target level of 1% of covered deposits within the Banking Union (approx. €55bn) will come into place as a last resort to finance the bank resolution process. This target level was calibrated by the European Commission when the proposal was first published and it takes account of the fact that losses will firstly be applied to the institutions' shareholders and creditors. The SRM regulation also requires the Board of the SRM to contract financial  arrangements for the Single Resolution Fund  where the amounts raised through contributions from institutions' are not sufficient to meet the Fund's obligations.

It is important to keep in mind that resolution is just one aspect of the package of financial reforms being introduced to restore confidence in the banking system and to make it more resilient to future financial crisis. There are also a number of measures within the resolution proposals and within other legislative reforms that require banks to organise themselves in such a way that greatly reduces the risk of their failure but also ensures they have appropriate mechanisms in place to withstand future crises should they arise. The powers of supervisors will also be significantly enhanced to ensure that they are in a position to impose requirements on banks that are commensurate with the level of risk on their books.

Better regulated and supervised banks will be stronger, more resilient, and operate to benefit the real economy at large, as well as ensuring that taxpayers don't have to foot the bill for banks' mistakes. The resolution framework will be there to ensure that there is a mechanism in place at EU level to deal with future bank failures should they arise, but reinforced supervision and robust preventative measures are key in minimising the risk of this happening and reducing any costs likely to arise.

On the issue of the timetable, it should be noted that the final agreement on the SRM reduces the transition period to a fully mutualised Single Resolution Fund from ten years down to eight years and I am supportive of this change. It also provides for accelerated mutualisation in the early years - 60% by the end of year 2. This is a very important feature and demonstrates the seriousness of Member States to break the link between the sovereign and the banking sector as quickly as possible.