BRUSSELS Jan 27 Euro zone governments are
considering inserting a "review clause" into their agreement on
the direct recapitalisation of banks so that they can reverse or
renegotiate the deal in the coming years, officials have told
Under the proposal, governments would be able to review
direct recapitalisation - one of the most hard-fought-over
principles of the debt crisis - after 10 years, once a single
euro zone bank resolution fund (SRF) is in place.
The discussion shows how far policymakers have moved on from
the height of the crisis in mid-2012, when the idea of direct
recapitalisation helped calm volatile markets.
Inserting a review clause would mark another victory for
Germany. Although it initially came up with the idea of direct
recapitalisation, it has since grown concerned about German
taxpayers having to stump up for banks in other countries.
The review clause is the initiative of Germany and Finland
but is supported by several other states, officials say.
"Germany and Finland told other euro zone countries last
week they would like direct bank recapitalisation to be in place
only for 10 years, starting from the date the SRF is set up," a
euro zone official with knowledge of the talks told Reuters.
Leaders agreed in 2012 that the euro zone's bailout fund,
the ESM, must have the option of directly buying a stake in a
bank to break the 'doom loop' that binds indebted governments to
the unstable banks they are trying to prop up.
Despite German opposition to direct recapitalisation, all
euro zone ministers agreed last June on guidelines for when the
500 billion euro ESM would be allowed to buy a stake in a bank.
However, they decided to wait until the passage of a new EU
law on bank recovery and resolution before turning those
guidelines into a legal text.
With the law on bank resolution agreed last month, and talks
underway on building a 55 billion euro bank resolution fund over
the next 10 years, the ministers now want to finalise the
guidelines on direct recapitalisation.
Another official said Germany and Finland had support since
ultimately there may be no need for the ESM to directly
recapitalise a bank. New "bail-in" rules state that
shareholders, bondholders and even large depositors in banks
will be first in line for any bank rescue, not taxpayers, making
direct recapitalisation potentially unnecessary.
"After the full bail-in laws are in effect and enforced in
every case and the SRF is fully funded, there should be very
little need left for the use of the ESM direct recapitalisation
tool," the second official said.
"After the SRF is complete...it should be a more theoretical
possibility at that point."
Yet while there is a push to insert a 10-year "review
clause" on direct recapitalisation, finance ministers are
unlikely to agree on scraping the possibility of direct recaps
altogether - a so-called "sunset clause".
"There may be a review clause, but there will not be a
sunset clause," a third policymaker said.