EC process and Brussels Mole confirm that a legal mechanism exists to fleece all of us in the event of a euro bank collapse
The exceptionally unexceptional Olli Rehn
In this follow-up to the weekend’s bailin process adoption posts, The Slog fills in the remaining pieces of the jigsaw. You may think you are a member of a Democratic European Union. You are not. There are many easy ways to hide from the EU Parliament: bundling a Delegated Regulation Supplement into a larger package (eg, on banking union); or the meeting of an EC committee followed by “no response” from MEPs are just two…the RRM is another. All have the force of Law. Follow the timeline, observe the press statements, read the speeches….and make your own minds up.
Let me at the outset pay tribute to two folks here. First, my longstanding Brussels mole who has gone more than the extra mile here to point me in the right direction; and the indefatigable Anna Raccoon (great post today by the way) mistress of the art of deconstructing obfuscation.
There is certainly no call at all for any tribute to the EU’s own press officers and bureaucrats. It’s obvious there is at least some degree of deliberate obfuscation going on as regards the Bailin Law question. There is, for example, no clear line of responsibility between Olli Rehn (Economic & Monetary Affairs) & Michael Barnier (European markets). All their press officers – and the EU Parliament’s press office – are on holiday now until 23rd August. And since 19th July until 26th August, the MEPs are in recess.
All of which presents a question I’ve been badgering the Brussels Mole with since yesterday afternoon: how can a bailin law have passed if the EU Parliament is as usual out to lunch enjoying annual holidays?
To which the answer is: because many instruments in the EU do not need democratic approval.
Hold that thought, and then follow this timeline.
The story starts in Michel Barnier’s manor after Cyprus. Quizzed by MEPs on 27th May this year, his inquisitors formally recorded their view that his answers were “unsatisfactory and evasive”.
But behind the scenes, the one-off that was a template and then an untemplate was being hastily turned into a proposal. This is where one or more EC committees recommend something full of caveats to see if anyone will notice.
Three weeks later on June 17th, Reuters teased out some facts from sources in Brussels. The euro zone, it confirmed “is separately working on a law, called the bank recovery and resolution directive (BRRD), that will establish its own order in which losses are imposed on those who entrusted money to a failing financial institution.”
In typical EC style, it outlined four options ranging from bromide to draconian. EC proposals always put the thing they want to do last.
Within ten days (this is going at the speed of light for the EU machine) the full EC Council decided on “a compromise”. While on the surface it looked very yes-and-no-with-reservations, as usual there was a disturbing Get out of Jail Free Card in small print at the end. My emphasis should be self-explanatory:
‘11228/13 4 E
The Council’s compromise approach provides flexibility to national resolution authorities, subject to strict criteria and only in exceptional cases, to exclude liabilities and to use the resolution fund to absorb losses or recapitalise an institution. However, such flexibility would only be available after a minimum level of losses equal to 8% of total liabilities including own funds has been imposed on an institution’s shareholders and creditors, or under special circumstances 20% of an institution’s risk-weighted assets‘.
This is classic EC/ECB doublespeak: we will be flexible, but only after we’ve cleaned you out, dear customer: 8% of a bank’s liabilities (by the EU’s own liquidity rules alone) in a full-on bank collapse would be more than enough to wipe out ‘shareholders and creditors’ – which as of May, by some Divine Right of Banks, has been taken to mean us.
In EUspeak, ‘exceptional’ and ‘special’ both mean the same thing: ‘inevitable’.
On July 7th ,Mario Draghi addressed a hearing at Rehn’s EAMAC as follows…..note the key word italicised: “until the
regulation on the single supervisory mechanism (SSM) is adopted, we at the ECB cannot formally take decisions. In this context, it is my understanding that the supervisory accountability arrangements with the Parliament, in line with the SSM regulation, are
nearing finalisation on the basis of a constructive stance by both parties.”
What does devious Draghi mean by finalisation and constructive behaviour? Exactly this:
‘In accordance with voting procedure on a Commission proposal, the qualified majority rule applies. If the vote is favourable (which is the case for the vast majority) The European Parliament and The Council of the European Union have 3 months to oppose the adoption of the draft Regulation by the Commission. If the European Parliament and the Council give their favourable opinion on the adoption or the 3 months elapsed without opposition from their side, the Commission adopts the draft Regulation. After adoption, it is published in the Official Journal and enters into force on the day laid down in the Regulation itself.
The first draft of the Barnier proposal was circulated on Friday May 3rd. The three months were up nine days ago. A draft resolution becomes law under this procedure when the regulation says so. This is the main contention of my source: he merely showed me where to look, thus saving me about a week’s work. But he also suggested other ways they could trump any MEP objections.
So I went to the EUParl press office site at the crack of sparrow this morning. And guess what? They’re all on holiday until August 23rd. There’s an emergency office phone with one bloke on call. It rang out, with no message service. But eventually I tracked down the bloke – Vaclav Lebeda – on his mobile. He was very helpful. And his input suggested yet another way in which such a regulation could become Law immediately.
Mr Lebeda said no, nothing had passed through the EUParl before the holidays….it (OBR procedure) is still due to be debated in the Autumn, with a view to becoming Law in 2014. He didn’t know what Mario Draghi meant by constructive cooperation between the Parliament and the Commission/Council. He didn’t seem evasive: he obviously just didn’t know.
“So if the Spanish banking system collapsed tomorrow, what would the EC and ECB do?” I asked Vaclav.
“Ah,” he answered, “That would then be defined as an emergency, and the EAMAC (Olli Rehn) would meet to take action. In exceptional circumstances, they could issue an emergency directive.”
There was that ‘exceptional’ word again. So I asked had there been any EAMAC meetings since the recess? He didn’t know, because (he very fairly pointed out) he was at the EUParl press office, not the EC or EAMAC office. And of course, they’re all on holiday too.
As Alistair Campbell might have said, “Yes, July-August is a good time to bury some bad news”. So I went back to the Mole, and this time he gave me another link dating from 2001. It related to something called the Rapid Response Mechanism. And it sort of makes the whole debate about “Proposal or Law” somewhat academic:
The European Council Regulation (EC)
No 381/2001 of 26 February 2001 created a rapid-reaction mechanism, to be used in those ‘exceptional’ circumstances where ‘the action is immediate and cannot be launched within a reasonable time-limit
under the existing legal instruments‘. Basically, it’s an Emergency Powers Act by any other name.
I have to leave the last word on this from my Mole….whose view, by the way, is unofficially corroborated by a long-standing Treasury-connected source:
“There are a thousand ways to ignore the EU Parliament. My information is that with some Parliamentary complicity, the proposal is in place as a regulation under the 3-month rule. But anyway, they could use the RRM, or they could just do it anyway – for example, Draghi at the second Greek bailout, or the Cyprus fiasco. I can only tell you what I know: on this issue, the full backing of European Law is already in place to conduct an Open Bank Reconciliation (bailin) where they could choose to do anything”.
The caveats in the proposal suggest they would indeed do anything to save the banks and the euro. Let’s see what further evidence – in the blogosphere or the MSM – can be dug up to add further support….to what looks pretty solidly to me like a done deal.
I’m off to pick some fruit.
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Thanks for your prodigious hard work John. Look after yourself.
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+1
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You got it.
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Thanks for your response Sharon.
My concerns remain the same:
1. The RRM is effectively an Emergency Powers Act.
2. Even without any law, Cyprus still got raped.
3. Derivatives are not just A problem in 2013: they are THE problem.
Regards
JW
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Indeed that was very close to what I was thinking too. Seems a lot of what is happening stateside commonly gets bought/brought in over the pond so to speak. We know that the ‘charity’ Common Purpose has infiltrated many establishment departments and so the learned dialogue trickled down affect has infected just about all the non thinkers.
The whole purpose of the acronyms and doublespeak is to make blind those reading any ‘instruments’ so the naysayers are in the absolute minority. This information as given by John – really shows how it is all basically predetermined and handed as law ‘under the table – especially while the cat is away!
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Think there a few things mixed up here. The Bail in rules require codecision with Parliament and we are in negotiations with council. They also apply EU wide not Eurozone. The same applies to the resolution fund proposals.
The agreement on accountability with the ECB is an extra that the Parliament is insiting upon alongside the SSM and I have held up the vote until we get our agreement.
Derivatives in bail in IS a problem and issue. Will need some tightening in my view and of course I am in the room. How about checking out the UK line in Council as well and whether UK Parliament examined it as issues moved.
Sharon Bowles MEP
Chair Economic and Monetary Affairs Committee
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Thank you for that response, Hermann. Keep up the good work on your poetry.
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Very Interesting, So we are all stitched up by not reading the small print?
A bit like the Vorgans in the Hitch Hikers Guide to the Galaxy.
“Ve hav come to demolish planet earth to make way for an Interstellar Bypass”.
“You did not know, well it was posted up in Galactic Central, as per memo a/12-5a”.
Or how many people read those planning notices attached to lamp posts?
Yes the Law is an arse, but it is the Law. So it must be enforced and adhered to?
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Nazi banksters construct!
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Thanks for the detail and the hard work that’s gone into finding it.
My worst fears are of course confirmed – yet again.
But as for “You may think you are a member of a Democratic European Union”, no, sorry, I was never ever under any such delusion. Was anyone?
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It is interesting to compare this with what is happening in the EU (Etats Uni) – there the Obama administration is similarly bypassing Congress by ruling with Executive Orders that are followed by the Agencies such as EPA. Indeed the choreographing of the EU and EU continues following the same ‘Common Purpose’.
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Lets cut thru’; all the legalese waffle here. The EU is obviously a banksters construct, specifically the BIS. They will do anything that is required to preserve their monopoly of the money system even unto the destruction of sovereign nations ( as in Greece,,Cyprus, Spain .Portugal, Italy et al).. Draghi, Schauble. Rehn are just their front men ,doing their Masters bidding. It is not a tin foil hat conspiracy any more ,it is an ongoing planned operation.
They will bring us into the abyss to preserve the status quo, but we are witnessing the dying days of the illegal ,fraudalent, Central banking money creation system. Their Achilles heel was always greed and now it is monumental unto destruction in the Western hemisphere. These are the dog days of the Empire of the West..
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European insolvent banks: the Council opts for bail-in 2.0
http://www.thecorner.eu/financial-markets/european-insolvent-banks-the-council-opts-for-bail-in-2-0/29391/
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Here you go:
http://finpolconsult.de/mediapool/16/169624/data/Bank_Creditor_Participation_Eurozone_Finpol_6_13_1_.pdf
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Hmmm, can anyone smell burning Reichstag?
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Very grateful to John for pointing to all this information. I knew that the EU could not be trusted, but didn’t think they would be so blatant to pass legislation behind closed doors and then do a Cyprus on everyone when they least expected it.
Could it be that they are already preparing for Spain’s inevitable collapse after the Gibraltar crisis flairs up?
Could it be that Rajoy is quite content to go to war, now that he knows the EU has the necessary legislation in place to bail Spain out once the shooting stops?
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Hmm. It seems that this “regulatory comitology procedure with scrutiny” is not applied anymore:
http://ec.europa.eu/transparency/regcomitology/index.cfm?do=implementing.home
-:-
Regulatory procedure with scrutiny (RPS)
This is a defunct comitology procedure that operated between 2006 and 2009 for “quasi-legislative measures”.
It can no longer be used in new legislation but appears in more than 300 existing legal acts and will temporarily continue to apply in these acts until they are formally amended.
-:-
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A scary story…..my thanks to JW and all who contributed to it. It seems to me that the Head Sprouts are putting as many funny clauses and emergency powers in the small print as fast as they can, in order to reduce The Democratic European Parliament into a mere talking shop.
I wonder if is is beginning to dawn on The Chief Sprouts that the next bunch of MEPs from May 2014 might not be ‘Our Nige v’s The Rest’, but are likely to consist of a considerable number of Club Med Anti Austerity, UKIP type, AforD, far Right and far Left etc. who have all been sent to Brussels by a monumentally pissed off European electorate to strangle every move towards further integration at birth, and torpedo as many schemes as possible for the Sprouts to gather further dictatorial powers.
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That’s priceless – Deep Sprout!
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I doubt Nigel Farage would respond,now what was the date that Mr Farage went to see Mr Murdoch
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Do note that for the 2012/0150(COD) “Credit institutions and investment firms: framework for recovery and resolution” directive, the procedure file states that it is handled under “Ordinary legislative procedure (ex-codecision procedure)”:
http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2012/0150%28COD%29
Googling for “Ordinary legislative procedure (ex-codecision procedure)” learns that this is the standard procedure and not that fast-track “regulatory comitology procedure with scrutiny”:
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The EU’s standard decision-making procedure is known as ‘Ordinary Legislative Procedure’ (ex “codecision”). This means that the directly elected European Parliament has to approve EU legislation together with the Council (the governments of the 28 EU countries). The Commission drafts and implements EU legislation.
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So, either there is an error on the procedure file, or there is a second similar draft proposal, which is handled under the “regulatory comitology procedure with scrutiny” if there indeed is a draft proposal currently under the three month procedure.
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Very interesting that a “3 month” procedure apparently exists. This pdf indeed says so:
http://ec.europa.eu/internal_market/accounting/docs/ias/endorsement_process.pdf
-:-
Based on the advice of EFRAG and the opinion of SARG, the Commission prepares a draft endorsement Regulation. The adoption of the Regulation follows a regulatory comitology procedure with scrutiny, in accordance with Articles 5a and 8 of the Council Decision 1999/468. This means in practice that:
[…]
If the European Parliament and the Council give their favourable opinion on the adoption or the 3 months elapsed without opposition from their side, the Commission adopts the draft Regulation.
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So, it’s called a “regulatory comitology procedure with scrutiny” and is to be foun in Articles 5a and 8 of the Council Decision 1999/468, which can be found googling for “Council Decision 1999/468”. It says a/o:
-:-
COUNCIL DECISION of 28 June 1999
laying down the procedures for the exercise of implementing powers conferred on the Commission (*)
(1999/468/EC)
[…]
Article 5a
Regulatory procedure with scrutiny
1. The Commission shall be assisted by a Regulatory Procedure with Scrutiny Committee composed of the representatives of the Member States and chaired by the representative of the Commission.
2. The representative of the Commission shall submit to the Committee a draft of the measures to be taken. The Committee shall deliver its opinion on the draft within a time-limit which the chairman may lay down according to the urgency of the matter. The opinion shall be delivered by the majority laid down in Article 205(2) and (4) of the Treaty in the case of decisions which the Council is required to adopt on a proposal from the Commission. The votes of the representatives of the Member States within the Committee shall be weighted in the manner set out in that Article. The chairman shall not vote.
3. If the measures envisaged by the Commission are in accordance with the opinion of the Committee, the following procedure shall apply:
(a) the Commission shall without delay submit the draft measures for scrutiny by the European Parliament and the Council;
(b) the European Parliament, acting by a majority of its component members, or the Council, acting by a qualified majority, may oppose the adoption of the said draft by the Commission, justifying their opposition by indicating that the draft measures proposed by the Commission exceed the implementing powers provided for in the basic instrument or that the draft is not compatible with the aim or the content of the basic instrument or does not respect the principles of subsidiarity or proportionality;
(c) if, within three months from the date of referral to them, the European Parliament or the Council opposes the draft measures, the latter shall not be adopted by the Commission. In that event, the Commission may submit to the Committee an amended draft of the measures or present a legislative proposal on the basis of the Treaty;
(d) if, on expiry of that period, neither the European Parliament nor the Council has opposed the draft measures, the latter shall be adopted by the Commission.
-:-
So, there you have it. If the parliament is asleep, the commission together with the committee can do as they please.
The time table is: “within three months from the date of referral to them”, while in art. 3.a it talks about submitting the draf *after* the approval of the Committee, which would be 20/05/2013 according to the “procedure file” I posted about yesterday.
In other words: as far as I can tell, the Parliament still has 8 calendar days to awaken from it’s sleep. Someone may give Nigel Farage an urgent call…..
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People would be well advised to convert all of their spare commercial Bank issued digital money into ‘Legal Tender’ (notes & coins) ASAP and leave the bare minimum in the Bank before they have chance to steal it? Then find a safe place to keep it… no irony there then!
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ITG
Auzgezeichnet!
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Malc – not quite sure I understand the point you are making when you say: “sources need to be supported especially their (his/her) identity”.
My point is this: yes, the MSM’s “informed sources” is used too often as an attribution to fudge a lack of any real sources beyond a journalists’s own view/knowledge – expert though it may be.
But – JW scrupulous re-telling of the mechanics of how this story was researched could make me anxious – if I were the Brussels source.
Memo to JW – you are good with nicknames. Let me propose a new one for your Brussels mole: DEEP SPROUT.
ithangyou, too
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There appears to be a lot of confusion in this article. There was no compromise within 10 days on the Bank Recovery and Resolution Directive – when the Council adopted a compromise in June the proposal had already been on the table for over a year (http://www.europarl.europa.eu/registre/docs_autres_institutions/commission_europeenne/com/2012/0280/COM_COM(2012)0280_EN.pdf).
Separately, the Regulation Mr. Draghi referred to on the Single Supervisory Mechanism is a completely separate legal proposal tabled in September 2012 (http://www.europarl.europa.eu/registre/docs_autres_institutions/commission_europeenne/com/2012/0511/COM_COM(2012)0511_EN.pdf).
The three-month rule you refer to can only ever be invoked under primary legislation that has already been adopted and entered into force, which is not the case for either of the above proposals. More importantly, the Regulation on the single supervisory mechanism is NOT subject to the three month rule but must be adopted by a qualified majority of EU Member States (you are correct, however, that the European Parliament does not have a binding say on this proposal because under EU Treaty rules it was submitted under a so-called ‘consultation procedure’).
The Parliament does have a binding say on the BRRD, for which a vote has been scheduled for November 2013.
While I share your concerns about the use of delegated and implementing acts which become law unless expressly blocked, that procedure is not the one used for their bank resolution & recovery or the SSM proposals.
PS. The Rapid Reaction Mechamism Regulation is not an ‘Emergency Powers Act’ but part of the EU’s foreign policy framework and only applies to crisis situations in non-EU countries that require humanitarian assistance or some other type of intervention. In any case, the Regulation was repealed six years ago when the Stability Instrument was created (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2006R1717:20061214:EN:PDF). This Regulation also applies solely to crisis situations in third countries.
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InTeleGent – you make an important point, the sources need to be supported especially their (his/her) identity.
The fact that the MSM is so quiet on this point is even more worrying isn’t?
Malc..
PS – a link to this article is already winging its way to numerous friends, all I think have no previous knowledge of this site.
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John
Congratulations and thanks for answering a number of the questions that have swirled around in my head since your first mention of the “Bailin Act”.
Do try not to burn your Brussels truffle by identifying him through giving too much detail of how he has helped solve puzzles – much as it does build confidence in the conclusions you draw.
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