Pearse Doherty (Donegal, Sinn Fein)
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101. To ask the Minister for Finance his views on how sovereign exposures at banks should be treated in terms of capital requirements in the context of the EU Commission's proposal to establish a European deposit insurance scheme; and if he will make a statement on the matter. [17401/16]

Pearse Doherty (Donegal, Sinn Fein)
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102. To ask the Minister for Finance his views on the need for a common backstop and whether this view is likely to prevail in the context of the EU Commission's proposal to establish a European deposit insurance scheme; and if he will make a statement on the matter. [17402/16]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 101 and 102 together.

The European Commission published a proposal on a European Deposit Insurance Scheme (EDIS) in December 2015. Discussions chaired by the Dutch Presidency of the European Council have been ongoing on this issue over the past six months, culminating in a report to last weeks Ecofin Council meeting

Common Backstop

At European level it had previously been agreed that a backstop to the Single Resolution Fund (SRF) will be in place at the end of the eight year transition period in 2024 and should be fiscally neutral in the medium term. Negotiations on this have yet to commence.

At the ECOFIN meeting of Finance Ministers on 17 June it was agreed that negotiations on a common backstop should start in September, providing all Member States have finalised the transposition of the Bank Recovery and Resolution Directive.  The Council conclusions also leave open the possibility that the backstop could be introduced ahead of the end of the transition period.  I am strongly in favour of reaching agreement on the back stop as early as possible.

Regulatory Treatment of Sovereign Exposures

The banking and financial services regulatory framework has only recently been changed following the introduction of CRD IV and further changes are impending such as the Leverage Ratio and the Net Stable Funding Ratio. In these circumstances I believe we must be cautious in our approach to the regulatory treatment of sovereign exposures. Most importantly, I believe Europe should only act in the context of a global solution to the bank sovereign debt issue. This issue was also considered at the 17 June Ecofin Council which concluded that Council should await the outcome of the Basel Committee before considering any further steps in the European context.

It is our view that completing EDIS is an important risk sharing measure. The Ecofin Council has agreed that work should continue on EDIS at a technical level and move to political level as further progress is made on Banking Union risk reduction measures.