Considerations on COM(2017)827 - Establishment of the European Monetary Fund - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)827 - Establishment of the European Monetary Fund. |
|---|---|
| document | COM(2017)827  |
| date | December 6, 2017 |
(2) That crisis revealed that the Union lacked sufficiently solid instruments to act swiftly and decisively in response to challenges to its financial stability. Those instruments are essential for the stability of the euro area, its Member States, for its citizens and other economic actors, and are paramount to strengthen confidence in the single currency.
(3) In response to the exceptional situation of a severe deterioration of the borrowing conditions of several Member States, beyond what could be explained by economic fundamentals, threatening the financial stability of the Union, a number of measures were adopted, some of them outside the framework of the Union.
(4) Firstly, a European Financial Stabilisation Mechanism (‘EFSM’) through which the Union could provide financial assistance to Member States was established in 2010. That mechanism allowed the Union to respond in a coordinated, rapid and active manner to acute difficulties in a particular Member State but with a limited financial capacity and on a purely temporary basis.
(5) Secondly, in 2010, the Member States whose currency is the euro also established among themselves the European Financial Stability Facility (‘EFSF’), on a temporary basis. The EFSF has provided financial assistance to Ireland, Portugal and Greece. The assistance was financed by the EFSF through the issuance of bonds and other debt instruments on capital markets. The EFSF does not provide any further financial assistance, as this task is currently performed solely by the European Stability Mechanism (‘ESM’).
(6) Thirdly, on 17 December 2010, the European Council agreed on the need for Member States whose currency is the euro to establish a permanent stability mechanism replacing the EFSF for granting possible new financial support.
(7) The ESM was established as an international financial institution by the Treaty establishing the European Stability Mechanism of 2 February 2012, concluded outside the framework of the Union. The ESM assumed the EFSF's task of providing financial assistance to Member States whose currency is the euro and became operational in October 2012.
(8) Over the years, the ESM has proven decisive in helping to preserve the financial stability of the euro area. It has done so by providing additional financial support to euro area Member States in distress. Its transformation into a European Monetary Fund ('EMF') will further strengthen its institutional anchoring. It will help to create new synergies within the EU framework, notably in terms of transparency, efficiency of the EU financial resources and legal review, thus offering a better support to Member States. It will also help improve further cooperation with the Commission and accountability to the European Parliament. This will be done without affecting the way in which national governments are held to account by their own national Parliaments and preserving the ESM commitments.
(9) The integration of the ESM into the Union framework by establishing the EMF also contributes to increasing transparency and accountability in the economic and monetary union (‘EMU’). At the height of the crisis, far-reaching decisions for Member States whose currency is the euro and for their citizens were taken. The pivotal role which the ESM played in providing financial stability subject to strict conditionality justifies its integration into the Union framework so as to ensure more dialogue, mutual trust and greater democratic accountability and legitimacy in the decision-making processes of the Union. The EMF should thus be accountable to the European parliament and to the Council.
(10) To enhance the democratic control by the European Parliament, the EMF should report annually on the execution of its tasks. The Parliament should be entitled to pose oral and written questions and to organise hearings. Given the sensitive nature of the activities of the EMF and their impact on financial markets, it should be possible for the Parliament to organise confidential oral discussions with the EMF's Managing Director on the progress made in relation to the process of providing or implementing financial stability support to an EMF Member as well as with respect to the provision of financial support to the Single Resolution Board (‘SRB’).
(11) For reasons of transparency and democratic control, national Parliaments should have rights to obtain information about the activities of, and to engage in a dialogue with the EMF. The national Parliament of an EMF Member should be able to invite the Managing Director to participate in a discussion in relation to progress made on the implementation of a financial stability support operation in view of the impact of such a measure on the EMF Member concerned. Such an exchange of views could help foster understanding between the EMF and the EMF Member concerned.
(12) The TEU and the TFEU have not provided the necessary powers, in the form of a specific legal basis, to establish a permanent Union body in charge of providing financial support for ensuring the financial stability of the euro area and of the Member States whose currency is not the euro but which participate in the Banking Union.
(13) In absence of such a specific legal basis, the Council, with the consent of the European Parliament, is allowed to establish an EMF as a measure that is necessary to attain one of the objectives set out in the Treaties within the meaning of Article 352 TFEU.
(14) Given the strong interconnections between Member States whose currency is the euro, severe risks to the financial stability of those Member States could put at risk the financial stability of the euro area as a whole. Therefore, the EMF should provide financial stability support to Member States whose currency is the euro where it is indispensable to safeguard the financial stability of the euro area or its Member States.
(15) Action by the Union is hence necessary to attain the objectives of establishing an economic and monetary union whose currency is the Union in accordance with Article 3(4) TEU, and of securing a sustainable development of Europe based on balanced economic growth and price stability, and a highly competitive social market economy, aiming at full employment and social progress in accordance with Article 3(3) TEU. More concretely, safeguarding the financial stability of the euro area, of the Member States whose currency is the euro, and of the Member States whose currency is not the euro that participate in the Banking Union aims at achieving a deeper, fairer and more resilient economic and monetary union.
(16) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States acting individually but can therefore, by reason of the scale of the action, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 TEU.
(17) The EMF should be established, pursuant to Union law, as a Union body with legal personality.
(18) The EMF should be governed by this Regulation and the Statute of the EMF, which forms an integral part of it. The Statute of the EMF should contain the relevant provisions on the legal status, membership, objectives and tasks of the EMF, its organisation and internal decision-making, the EMF's lending capacity and capital, the rules governing the provision of stability support to Member States whose currency is the euro and the EMF's support to the SRB, the rules related to the EMF's financial provisions and financial management, and the transitional arrangements governing the payment of new EMF Members initial capital and the rules regarding the temporary correction of the EMF contribution key and a number of general provisions.
(19) In order to ensure a seamless continuation of activities and the required legal certainty, the EMF should replace the ESM succeeding it in its legal position, including in all its rights and obligations.
(20) The succession of the EMF to the ESM does not create any new financial obligations for Member States whose currency is the euro as regards their contribution to the authorised capital stock of the EMF, which they have already subscribed.
(21) Given the legal nature of the ESM as an international financial institution based on an international agreement between the Member States whose currency is the euro, the Board of Governors, as the highest decision-making body of the ESM representing the Contracting Parties to the ESM Treaty, should give its prior consent to such succession and transfer of the subscribed capital. The succession should be completed upon the entry into force of this Regulation and the consent of the ESM, whichever is the latest.
(22) All Member States whose currency is the euro and which are currently Contracting Parties to the ESM Treaty should be members of the EMF at the moment of the entry into force of this Regulation. As a consequence of adopting the euro, a Member State should become an EMF Member with full rights and obligations, in line with those of the existing EMF Members.
(23) The rights of a new EMF Member under this Regulation, including voting rights, should be conditional upon subscription of their contribution to the authorised capital stock.
(24) Transitional rules, similar to those provided for in the ESM Treaty, should be enshrined as regards new EMF Members which adopt the euro after the entry into force of this Regulation. It should be possible for those Members to pay-in the contribution to the EMF's capital in instalments. Those new EMF Members whose GDP per capita is below 75 percent of the Union GDP per capita in the year preceding its entry into the EMF should benefit from a temporary correction of the contribution key for paying in capital of the EMF. In such a case, the temporary correction should apply for a period of twelve years.
(25) The stability support provided for by the EMF should be subject to strict policy conditions. Such conditions should be appropriate to the financial assistance instrument chosen.
(26) The policy conditions attached to the financial assistance facility should be defined in a memorandum of understanding (‘MoU’) and should be fully consistent with any of the measures of economic policy coordination adopted on the basis of the TFEU. A social impact assessment should inform the negotiation of the MoU and guide the follow-up and monitoring of its implementation.
(27) The Single Supervisory Mechanism ('SSM') established by Council Regulation (EU) No 1024/2013 23 and the Single Resolution Mechanism (‘SRM’) established by Regulation No 806/2014 of the European Parliament and of the Council 24 were created in response to the crisis, as steps towards a Banking Union, to cover the Member States whose currency is the euro and those Member States whose currency is not the euro but choose to participate in the SSM (the ‘participating Member States’) in accordance with Article 7 of Regulation (EU) No 1024/2013, making them subject to the supervisory powers of the ECB and the resolution powers of the SRB in relation to their credit institutions.
(28) Supervisory control and resolution operations at Union level underpin the establishment of a Banking Union. The EMF should hence provide financial support to the SRB, the central resolution authority established by Regulation No 806/2014 by means of credit lines or guarantees for the tasks which the SRB executes or will execute in relation to credit institutions within the Banking Union.
(29) As part of the creation of the SRM, the Single Resolution Fund (‘SRF’) was established. It is financed by bank contributions raised at national level and pooled at Union level. Pursuant to Article 74 of Regulation No 806/2014, the SRB can contract for the SRF public financial arrangements of additional financial means to be used where the ex-ante and ex-post contributions are not sufficient to meet the Funds' obligations.
(30) The EMF should have sufficient financial means to carry out its duties effectively. Given the Union's limited own resources, EMF Members should provide the necessary means in exchange for the rights provided in this Regulation. This should be reflected in appropriate governance arrangements and voting rules ensuring Members' sufficient oversight over the use of the funds that they provide.
(31) In view of the EMF's specific financial structure, the voting rights of each EMF Member should reflect the weight of their individual financial contribution to the EMF. The decision making within the EMF's governance bodies should therefore take place in accordance with voting rules that build upon those already existing in the ESM Treaty, to ensure to the largest extent possible a continuity of existing voting practice.
(32) Insofar as Member States whose currency is not the euro participate in the Banking Union, their representatives should participate in the meetings of the Board of Governors for any discussions as regards the use of credit lines or guarantees in support of the SRB.
(33) The Board of Governors and the Board of Directors should be able to establish permanent or ad hoc committees or subsidiary bodies as they consider necessary or appropriate to advise or otherwise assist them or the Managing Director in the performance of their respective duties. Rules on their tasks, composition and operation should be defined internally. Such committees or subsidiary bodies should not have any decision-making powers.
(34) Following established case-law, decisions taken within the framework of the EMF relating to economic policy and involving a considerable degree of discretion should only be taken with approval and under the responsibility of the Union institutions. In line with the powers enshrined in the Treaties for the coordination of the economic policies of the Member States and with other acts of secondary Union law, the power to approve such decisions pursuant to Article 291 TFEU should be conferred upon the Council.
(35) As regards the instruments aimed at granting stability support to EMF Members, the present Regulation is adopted pursuant to Article 352 TFEU as a necessary measure complementing the powers laid down by the Treaty provisions specific to Member States whose currency is the euro (Articles 136 to 138 TFEU). According to those provisions, for Council measures only the members representing Member States whose currency is the euro take part in the vote. For those instruments, this Regulation exclusively concerns the use of resources made available by the Member States whose currency is the euro for the sole benefit of those Member States, with a view to guaranteeing stability in the euro area. In consequence, for decisions of the Council to approve the acts referred to in the previous recital the votes of non-euro area Member States should be suspended and only members of the Council representing Member States whose currency is the euro should take part in the vote.
(36) An emergency procedure should be established for the Council to endorse or object to decisions of the EMF governing bodies where the urgent provision of financial stability support to EMF Members is required. In such a case, the Chairperson of the Board of Governors should be able to request the Council to endorse or object to a decision within 24 hours from the transmission of the decision. The emergency procedure could be used for the approval of the financial terms and conditions and the financial assistance facility agreements regarding support to the SRB by means of credit lines or guarantees of the EMF.
(37) The Board of Governors should be entitled to adopt Rules of Procedure governing the practical aspects of the EMF's operations. Those Rules of Procedure should replace the ESM By-laws and the rules of procedure of the Board of Governors and Board of Directors.
(38) The lending capacity of the EMF should be no less than EUR 500 000 million. That amount reflects the current lending capacity of the ESM. The Board of Governors should be able to increase the lending capacity, if it deems that such a review is appropriate for enabling the EMF to pursue its objectives and related tasks. Since such a decision has a significant financial impact for EMF Members, it should be taken unanimously by the Board of Governors. In duly justified exceptional cases, the Board of Governors may also provisionally decrease the lending capacity if this is needed to ensure the ability of the EMF to fulfil its functions.
(39) At inception, the EMF's initial authorised capital stock should reflect the authorised capital stock of the ESM. Member States whose currency is the euro should be the sole subscribers of the EMF's authorised capital stock, which should amount to EUR 704 798.7 million, to be divided in equal shares. The liability of an EMF Member should be limited to its portion of the authorised capital stock. EMF Members should not be liable for the obligations of the EMF. The Union budget should not be liable for expenses or losses of the EMF.
(40) The Board of Governors should be able to increase the capital of the initial authorised capital stock if it deems such an increase appropriate for enabling the EMF to pursue its objectives and tasks. The ensuing capital and shares between the EMF Members should be published in the Official Journal of the European Union.
(41) Like the ESM, the EMF should provide stability support to its Members when their regular access to market financing is impaired or is at risk of being impaired.
(42) The EMF should be involved in the negotiation and signing of the MoU in view of the importance of the conditionality attached to the financial assistance for contributing to ensuring the repayment of EMF financial assistance.
(43) The range of financial instruments currently available for the ESM should also be available for the EMF, including the possibility to provide precautionary financial assistance, financial assistance for the recapitalisation of credit institutions in an EMF Member, the direct recapitalisation of credit institutions in an EMF Member, the provision of loans, and the purchasing bonds of an EMF Member on the primary and secondary markets.
(44) The objective of financial stability support in the form of precautionary financial assistance is to support sound policies and prevent crisis situations, allowing EMF Members the possibility to access EMF assistance before they face major difficulties raising funds in the capital markets. Precautionary financial assistance aims at helping EMF Members whose economic conditions are still sound to maintain continuous access to market financing by reinforcing the credibility of their macroeconomic performance while ensuring an adequate safety-net.
(45) Financial assistance to EMF Members in the form of a loan to recapitalise beneficiary credit institutions should address cases where financial or economic distress is linked to the financial sector and not directly related to fiscal or structural policies. Therefore, financial assistance for the purpose of recapitalising financial institutions should be granted to an EMF Member outside the framework of a macroeconomic adjustment programme.
(46) The instrument of direct recapitalisation of credit institutions aims at preserving the financial stability of the euro area as a whole and of its Member States by catering for those specific cases in which an EMF Member experiences severe difficulties with its financial sector that cannot be remedied without significantly endangering its fiscal sustainability due to a severe risk of contagion from the financial sector to the sovereign. The use of that instrument could also be considered if other alternatives would have the effect of endangering the continuous market access of an EMF Member. As far as the use of the instrument of an EMF loan for the recapitalisation of financial institutions is not possible, such financial assistance seeks to help remove the risk of contagion from the financial sector to the sovereign by allowing for the direct recapitalisation of institutions, thereby reducing the risks of a vicious circle between a fragile financial sector and a deteriorating creditworthiness of the sovereign.
(47) There should be financial stability support in the form of loans to assist EMF Members that have significant financing needs but have to a large extent lost access to market financing, either because they cannot find lenders or because lenders will only provide financing at excessive prices that would adversely impact the sustainability of public finances.
(48) In the same way as ESM loans, future EMF loans and outstanding ESM loans should enjoy preferred creditor status in a similar fashion to those of the International Monetary Fund (‘IMF’). However, they should rank second after IMF loans. That status should be effective as of the date of entry into force of this Regulation.
(49) In order for EMF Members to maintain or restore their market access, the EMF should be able to engage in purchases on the primary market of bonds or other debt securities issued by EMF Members under the primary market support facility, in addition to regular loans under a macroeconomic adjustment programme or to draw-downs of funds under the precautionary financial assistance instrument.
(50) The EMF should be able to buy bonds of an EMF Member on the secondary market. The secondary market support facility should aim at supporting the good functioning of the government debt markets of EMF Members in exceptional circumstances where the lack of market liquidity threatens financial stability, with a risk of pushing sovereign interest rates towards unsustainable levels and creating refinancing problems for the banking system of the EMF Member concerned. An EMF secondary market intervention should enable market making that would ensure some debt market liquidity and incentivise investors to further participate in the financing of EMF Members.
(51) The Member States whose currency is the euro should support equivalent creditor status of the EMF and that of other Member States lending bilaterally in coordination with the EMF.
(52) This Regulation should not affect the commitment agreed between the Contracting Parties to the Treaty establishing the ESM pursuant to Article 12(3) of that Treaty, namely that collective action clauses must be included in all new euro area government securities, with a maturity above one year, in a way which ensures that their legal impact is identical.
(53) Support to the SRB, through credit lines or guarantees, should be made available in situations where the amounts raised under Article 70 of Regulation (EU) No 806/2014 are not sufficient to cover the losses, costs or other expenses incurred by the use of the SRF in relation to resolution actions and where the extraordinary ex-post contributions provided for in Article 71 of Regulation (EU) No 806/2014 are not immediately accessible.
(54) In order to ensure appropriate equivalent treatment within the Banking Union, participating Member States whose currency is not the euro should offer to the SRB, in parallel to the EMF, credit lines or guarantees on equivalent terms and conditions as those of the EMF.
(55) Other Member States whose currency is not the euro should provide for credit lines or guarantees when notifying to the other Member States, the Commission, the ECB, and European Banking Authority the request to enter into a close cooperation with the ECB in relation to the exercise of tasks conferred to it pursuant to Council Regulation (EU) No 1024/2013, subject to the adoption of the ECB decision.
(56) From 1 January 2024 the resources in the SRF will be fully mutualised. From that date, Regulation (EU) No 806/2014 stipulates that banks in all Member States participating in the Banking Union are to contribute to the SRF and provide extraordinary ex post contributions to repay borrowings from third parties, in line with a key established on the basis of their size and risk profile. As the support to the SRB is intended to complement the SRF's resources, the same key, applied to the level of the Member States whose currency is not the euro participating in the Banking Union and the EMF should be the basis for determining their respective participation in the support to be provided.
(57) The Board of Governors should adopt the applicable financial terms and conditions for the set-up of the backstop by the EMF. With a view to ensuring their appropriate involvement, the EMF and the participating Member States whose currency is not the euro should agree to the financial terms and conditions attached to the credit lines or guarantees to be provided to the SRB as well as the overall ceiling applicable, which should be revised proportionally when a Member State whose currency is not the euro joins the Banking Union.
(58) The Managing Director should have the authority to decide, within 12 hours from the reception of the SRB's request, on the drawdown of the credit line or the provision of guarantees on the liabilities of the SRB.
(59) In order to ensure the immediate availability of additional financial means to the SRF, the SRB should be able to issue a request for support prior to the adoption of a specific resolution scheme. That should be done in consultation with the Commission, in accordance with the procedure under Article 18 of Regulation (EU) No 806/2014. For decisions related to resolution schemes, the decision of the Managing Director should take effect only once a resolution scheme enters into force in accordance with Article 18 of that Regulation. The sequencing of the request and of the decision should not add to the existing timeline of the resolution procedure as established in Article 18 of Regulation (EU) No 806/2014.
(60) The Managing Director's decision regarding disbursement of funds or the granting of guarantees should only be contingent on the SRB conducting its activities pursuant to Regulation (EU) 806/2014, including the applicable bail-in rules. No further conditions should apply.
(61) In order to ensure that the EMF continues to be able to provide financial support to its Members when needed, the amount available for the purposes of support to the SRB should be subject to a ceiling of EUR 60 000 million. However, the EMF should be able to respond flexibly to unforeseen funding needs arising from resolution operations. Therefore, the Board of Governors should have the power to increase the ceiling accordingly.
(62) Any financial support provided to the SRB by the EMF and any financial support being provided by participating Member States whose currency is not the euro should be fully repaid by the SRB from its own resources, including contributions from the industry.
(63) Appropriate rules should be laid down as regards the budget of the EMF and the internal and external audit of its accounts. The EMF's financial statements and accounts should be audited and certified by independent external auditors since the EMF's is an actor in the financial markets. In addition, there should be an independent Board of Auditors which tasks should be to inspect and audit the EMF’s accounts, and ensure compliance, performance and correct risk management of the EMF. It should also monitor and review the EMF's internal and external audit review processes.
(64) The powers of the independent external auditors and the Board of Auditors are without prejudice to the powers of the European Court of Auditors pursuant to Article 287 TFEU.
(65) Protocol No 7 on the Privileges and Immunities of the European Union annexed to the TEU and the TFUE should be applicable to the EMF. The Chairperson of the Board of Governors and in particular the Governors, alternate Governors, the Directors, and alternate Directors should, as representatives of EMF Members, enjoy the privileges and immunities granted by virtue of Article 10 of that Protocol.
(66) To enable the EMF to fulfil the tasks currently performed by the ESM as well as its new tasks, transitional measures should be laid down, in particular with regard to the Managing Director, the Management Board and staff which are currently employed under a contract with the ESM. This should also include nationals of third countries which are currently employed by the ESM. The existing contractual arrangements should continue to apply to staff employed by the ESM before the entry into force of this Regulation. Staff joining the EMF, after the entry force of this Regulation, shall be subject to the Staff Regulations, the Conditions of Employment of Other Servants and the rules of application.
(67) In order to preserve the confidentiality of the work of the EMF, the members of its governing bodies and its staff, including the staff exchanged with or seconded by EMF Members for the purpose of carrying out the EMF's tasks, should be subject to requirements of professional secrecy, even after their duties have ceased. A code of conduct should be established in that respect.
(68) The obligation of confidentiality should also apply to observers invited to attend the meetings of the Board of Governors and to participants in such meetings of participating Member States whose currency is not the euro. For the purpose of performing the tasks conferred to it by this Regulation, the EMF should be authorised, subject to conditions, to exchange information with its Members, other Union authorities and bodies as well as with certain national authorities.
(69) For the purpose of fulfilling its objectives, the EMF should cooperate with Union institutions and other bodies, offices or agencies as well as with third States which provide financial assistance to an EMF Member. The EMF should also be entitled to cooperate with international organisations or entities having special responsibilities in fields related to the EMF's activities. This includes amongst others, the IMF and central banks.
(70) The EMF should be subject to the Union rules on public access to documents. When assessing the grounds for refusing access to a document set out in Article 4 of Regulation (EC) No 1049/2001 of the European Parliament and of the Council 25 , the EMF should duly take into account the need to protect the confidentiality of the proceedings of the Board of Governors, the Board of Directors, any of their respective committees, the Management Board and the Board of Auditors, the internal finances of the EMF and the stability of the financial system in the euro area, of an EMF Member, or of a participating Member State as defined by Article 2 of Council Regulation (EU) No 1024/2013, and also of the international, financial, monetary or economic relations.
(71) In the future, the EMF could also be conferred new financial instruments, e.g. to support policy initiatives related to the establishment of a stabilisation function. A stabilisation function is intended to attenuate the effects of large asymmetric shocks. To this effect, it would rapidly activate countercyclical resources in an automatic way, subject to eligibility criteria defined in advance. The EMF could support the implementation of such a function by means of organising and making available any necessary market financing associated with the triggering of the function.
(72) A possible form of such support by the EMF to a stabilisation function would be that upon activation the EMF would provide loans to the beneficiary EMF Member. The loans provided by the EMF could be provided without conditionality while the activation of the stabilisation function itself would be made subject to the adherence of pre-defined eligibility criteria,