Ecofin 9 y 10 de julio

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Ecofin 9 y 10 de julio

  1. 1. Brussels, 6 July 2012 BACKGROU D1 ECO OMIC and FI A CIAL AFFAIRS COU CIL Tuesday 10 July in BrusselsA meeting of the Eurogroup will be held on Monday 9 July, starting at 17.00.Proceedings on Tuesday will commence at 9.00 with a breakfast meeting to discuss the economicsituation, as well as bank recapitalisation.Starting at 10.00, the Council will discuss - in the light of the position taken by the EuropeanParliament - two proposals aimed at further improving economic governance in the euro area.It will hold a preliminary debate on a proposal establishing a framework for bank recovery andresolution.The Council will also be briefed on negotiations with the European Parliament on proposalsamending the EUs rules on bank capital requirements.Amongst the other items on its agenda, the Council will adopt country-specific recommendationsto the member states on their economic and fiscal policies.Press conferences: • after the Eurogroup meeting (Monday evening); • at the end of the Council (Tuesday, before lunch).Press conferences and public events by video streaming: http://video.consilium.europa.eu/Video coverage in broadcast quality (MPEG4): http://tvnewsroom.consilium.europa.euPhotographic library on www.consilium.europa.eu/photo for photos in high resolution. * * *1 This note has been drawn up under the responsibility of the press office Council of the European Union General Secretariat - press office press.office@consilium.europa.eu Tel.: +32 (0)2 281 63 19 -1- E
  2. 2. Economic governance - Second packageThe presidency will inform the Council of the process to be followed with a view to reaching anagreement with the European Parliament on two draft regulations on economic governance, namely: o a regulation for enhanced monitoring and assessment of draft budgetary plans of euro area member states, especially those subject to an excessive deficit procedure (doc. 17231/11); o a regulation on enhanced surveillance of euro area member states that are experiencing severe financial disturbance or request financial assistance (doc. 17230/11).This second package of proposals was presented by the Commission in November 2011 followingadoption of the so-called "six-pack" of economic governance proposals2. The Council agreed ageneral approach on the proposals at its meeting on 21 February; the Parliament established itsnegotiating position in June.The two draft regulations introduce provisions for enhanced monitoring of countries budgetarypolicies. Member states would be required to submit annually to the Council and the Commissiontheir draft budgetary plans for the next year by 15 October. Closer monitoring would apply tomember states in excessive deficit procedure in order to enable the Commission to better assesswhether a risk of non-compliance with the deadline to correct the excessive deficit exists. Memberstates experiencing severe difficulties with regard to their financial stability or receiving financialassistance on a precautionary basis would be subject to even tighter monitoring than member statesin excessive deficit procedure.Based on article 136 of the Treaty on the Functioning of the European Union, the regulationsrequire a qualified majority of delegations from the 17 countries of the euro area for adoption by theCouncil, following consultation of the Parliament.Bank capital requirementsThe presidency will inform the Council of progress in negotiations with the European Parliament ontwo proposals amending the EUs rules on capital requirements for banks and investment firms("CRD 4").The Council agreed a general approach on 15 May. The proposals set out to amend and replace theexisting capital requirement directives3 and divide them into two new legislative instruments: aregulation establishing prudential requirements that institutions need to respect and a directivegoverning access to deposit-taking activities.They are aimed at transposing into EU law an international agreement approved by the G-20 inNovember 2010. The so-called Basel 3 agreement, concluded by the Basel Committee on BankingSupervision, strengthens bank capital requirements, introduces a mandatory capital conservationbuffer and a discretionary countercyclical buffer, and sets new regulatory requirements for bankliquidity and bank leverage.2 For details, see press release 16446/11.3 Directives 2006/48/EC and 2006/49/EC -2- E
  3. 3. The negotiations with the Parliament are aimed at adoption of the regulation and directive at firstreading. Outstanding issues include a proposed flexibility package4, bankers remuneration, crisismanagement, sanctions, the balance of power between authorities of "home" and "host" countries,corporate governance, and powers to be given to the European Banking Authority (EBA).The regulation would be directly applicable in order to prevent divergences in implementation atnational level. The Councils text sets capital requirements and introduces initial liquidityrequirements from 2013 in accordance with national provisions, and a fully calibrated EU liquidityrequirement from 20155. To address longer term funding issues, it calls on the Commission tosubmit by 31 December 2016 a report6 and, if appropriate, a legislative proposal for a stable fundingrequirement.The Councils text also provides for the introduction of a leverage ratio from 1 January 2018, on thebasis of a report to be presented by the Commission in 2016.The draft regulation would require banks and investment firms to hold common equity tier 1(CET 1) capital of 4.5% of risk weighted assets, up from 2% applicable under current rules(CRD 2). The total capital requirement remains unchanged at 8%. The Councils draft definesCET 1 capital instruments using 14 criteria, already set out by Basel 3, and mandates the EBA tomonitor the quality of instruments issued by institutions.The draft directive introduces additional requirements for a capital conservation buffer of 2.5%CET 1 identical for all banks in the EU, and an institution-specific countercyclical capital buffer7,as well as the possibility for member states to introduce a systemic risk buffer for the banking sectoror one or more subsets of it.The CRD 4 proposals also strengthen governance and supervision requirements, provide forsupervisors to apply sanctions if EU rules are breached and seek to reduce reliance by creditinstitutions on external credit ratings by encouraging internal ratings based approaches or internalmodels.Based respectively on articles 114 and 53(1) of the Treaty on the Functioning of the EuropeanUnion, the regulation and the directive will require for their adoption a qualified majority in theCouncil and a majority in the Parliament (ordinary legislative procedure).Bank recovery and resolutionThe Commission will present its proposal for a directive establishing a framework for the recoveryand resolution of credit institutions and investment firms (doc. 11066/12). The Council may hold apreliminary exchange of views.4 Flexibility for member states to impose additional measures, such as higher capital requirements.5 To be introduced by delegated act, on the basis of a recommendation by the Basel committee.6 On the basis of an evaluation by the EBA.7 National authorities would be responsible for setting countercyclical buffer rates within their jurisdictions, while financial institutions would have to set their buffer according on their credit exposure to the various jurisdictions. -3- E
  4. 4. The proposal, issued by the Commission on 6 June, is aimed at providing supervisory authoritieswith common tools and powers to tackle bank crises pre-emptively and to resolve any financialinstitution in an orderly manner in the event of insolvency, whilst minimising taxpayers exposure tolosses.The directive would establish a range of instruments that supervisory authorities could use:preparatory and preventative measures, early intervention, and resolution tools and powers. Themain resolution measures would include:- the sale of (a part of) business;- establishment of a bridge institution (the temporary transfer of good bank assets to a publicly controlled entity);- asset separation (the transfer of impaired assets to an asset management vehicle)- bail-in measures (the imposition of losses, in order of seniority, on shareholders and unsecured creditors).The proposal is aimed at transposing into EU law commitments made at the G-20 Washingtonsummit in November 2008, when leaders called for a review of resolution regimes and bankruptcylaws "to ensure that they permit an orderly wind-down of large complex cross-border financialinstitutions."Based on article 114 of the Treaty on the Functioning of the European Union, the directive willrequire for its adoption a qualified majority in the Council and a majority in the EuropeanParliament (ordinary legislative procedure).The presidencys aim is for the Council to agree a general approach by December, subsequent towhich negotiations with the Parliament will start, with a view to adoption of the directive at firstreading.Presidency work programme– Public debateThe Cyprus presidency will present a work programme on economic and financial matters for theduration of its term of office, which runs from July to December 2012 (doc. 11754/12). The Councilwill hold an exchange of views.The Cyprus presidency intends to focus on effective implementation of recently adopted initiativesfor improving economic governance, ensuring fiscal consolidation, strengthening the Europeanfinancial services framework and accelerating structural reforms, with a view to enhancing growthpotential and social cohesion in the EU. The presidency will also give priority to further work ontaxation issues. It will further aim for effective coordination within the EU with a view to ensuringappropriate representation of EU positions within international fora, such as G20 meetings, andsecuring European interests overall.This item will be the subject of a public debate which may be followed on the Councils website:http://video.consilium.europa.eu/. -4- E
  5. 5. Follow-up to the June European CouncilThe Council will discuss the follow-up to be given to the European Councils meeting on 28 and29 June as regards economic policy, in particular the process to be followed in establishing a singleEuropean banking supervisor.European Semester – Recommendations on economic and fiscal policiesThe Council will discuss, on the basis of a note from the Economic and Financial Committee, theprocess followed for the European Semester monitoring exercise.Whilst the outcome of this years exercise is overall considered as satisfactory, the Council willexamine possible improvements. A comprehensive review of implementation is scheduled forOctober.Without further discussion the Council is moreover due to issue, under this years EuropeanSemester:- recommendations to each member state on the economic policies set out in their national reform programmes;- opinions on the fiscal policies set out in the member states stability and convergence programmes; and- a specific recommendation on the economic policies of the member states of the eurozone.The Council will also issue explanations in cases where its recommendations or opinions do notcomply with those proposed by the Commission, in accordance with the "comply or explain"principle established last year under the EUs "six-pack" of economic governance legislation.The European Semester involves simultaneous monitoring of economic and fiscal policies, inaccordance with common rules, during a six-month period every year. Member states presentannually in April: o national reform programmes, containing a macroeconomic scenario for the medium term, national targets for implementing the "Europe 2020" strategy for jobs and growth, identification of the main obstacles to growth, and measures for concentrating growth- enhancing initiatives in an early period; o stability or convergence programmes8, setting out medium-term budgetary objectives, the main assumptions about expected economic developments, a description of budgetary and other economic policy measures, and an analysis of how changes in assumptions will affect their fiscal and debt positions.Adoption of the texts, following their endorsement by the European Council, will conclude thisyears European Semester.Based respectively on articles 121(2) and 148(4) of the Treaty on the Functioning of the EuropeanUnion, the recommendations and opinions require for their adoption a qualified majority in theCouncil. _________________8 Eurozone member states present stability programmes, those member states that dont use the euro present convergence programmes. -5- E

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