Securing consensus on bank resolution will be uphill battle for EU ministers

EU finance ministers meeting today for their penultimate gathering under the Irish presidency of the EU council face a packed agenda.

First under discussion is tax evasion and tax fraud, which has moved up the political agenda in recent months.

Member states are expected to give the go-ahead for negotiations to start between the European Commission and non-EU countries such as Monaco and San Marino on existing tax agreements.

Progress is also expected on amending the EU’s savings tax directive, a key piece of EU legislation that obliges countries to share information on savings income.

Stance softening
Austria, the only EU state not to adhere to the automatic exchange of information about foreign-held bank accounts, is believed to have softened its resistance to the exchange of bank account information. But any agreement on strengthening EU rules on the taxation of savings income is unlikely to be signed off on until next week's meeting of EU leaders.

The real challenge today will be the political discussion on bank resolution and recovery.

The Irish presidency faces an uphill battle in securing even broad-based political consensus on the issue.

With an agreement on the single supervisory mechanism earlier this year, the focus has shifted to forging common rules for banking resolution and recovery, as EU policy strives to shift the burden of future bank failures away from taxpayers and onto private creditors, including bondholders and depositors. But Germany’s lukewarm response to the concept of banking union has weighed on discussions.

Call for flexibility
Britain in particular is calling for greater flexibility on the single resolution rules, with British chancellor George Osborne likely to argue that countries should be given discretion on how to apply the bail-in rules. Critics of the new regime say a deposit-preference system advocated by the Irish presidency – that prescribes which creditors must be bailed in in the event of a bank wind-down – could lead to some financial destabilisation.

Flexibility is a key point of discussion in today's talks. As Minister for Finance Michael Noonan said yesterday, sanctioning too much flexibility could lead to distortions between countries and undermine the single market. "What we're looking for is banking union, where everybody plays by common rules," he said.

Whether all countries are prepared to sign up to an integrated single-rule system for banking should become clearer today.