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SME’s Get Bail From Bail-in

Some noteworthy signs of progress over the weekend from the EU with respect to bail-in guidelines. The FT reported on Sunday night that a majority of the Council of Ministers supported an exemption for small and medium-sized enterprises (SMEs), as well as the widely-flagged exclusion of all deposits by individuals, from the ambit of bail-in provisions.

Broadly defined as enterprises with less than 250 employees and turnover no greater than €50m, SMEs are regarded as the engine of innovation and future growth, accounting for 75 million jobs and 99% of enterprises across the EU.

The bail-in mechanism forms one of the two “legs” which will comprise the single resolution mechanism.  Following the decision to create a single, separately capitalised bank supervisor, the delay in agreeing the broad outline of a single bailout authority is the main stumbling block in the implementation of a European banking union.

Despite the weekend’s advance, the specific national implementation of the bail-in proposals remains a source of multiple conflicts, with talks due to resume on Wednesday. Dissension is particularly acute between Euro and non-Eurozone countries, with respect to the bail-in implications of ECB liquidity provision and the Eurozone €500bn bailout fund.

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