EU Flash: results ECOFIN meeting and completion of the European Banking Union

13/10/2017

During the latest meeting of the Economic and Financial Affairs Council (ECOFIN), the Council adopted proposals on climate change. Proposals on VAT reform, digital economy taxation, dispute resolution in double taxation and bank capital requirements are also being considered. Furthermore, the European Commission called for the completion of the European Banking Union by 2018 in a communication on 11 October 2017.

October ECOFIN meeting

On October 10th, the European Ministers of Finance discussed climate change financing, VAT reform, digital economy taxation and dispute resolution in double taxation.

Climate change

In the lead-up to the 23rd conference of the parties (COP23) to the UN framework convention on climate change in November 2017, the Economic and Financial Affairs Council (ECOFIN) adopted conclusions on climate change, including the financing aspects of it.

The EU and its Member States have committed to scale up their public finance contributions for the coming years. The conclusions adopted by the Council call for participation of a broader range of contributors, urging other developed countries to meet their commitments and to mobilise private finance.

Commissioner Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, announced that early next year, the Commission will present a comprehensive EU strategy for sustainable and green finance, including EU-wide green labels and classification for green assets.

EU proposals for VAT reform, digital economy taxation, dispute resolution in double taxation.

The Commission is preparing a reform of the EU VAT system to make it more simple, fraudproof and business-friendly. The Commission also presented a communication on the taxation of the digital economy to the Minsters of Finance.

The EU Presidency reported on the EU summit on digital issues held in Tallinn on 29 September 2017. Conclusions will be prepared for the Council's meeting on 5 December 2017 as input for discussions by the OECD and G20 finance ministers meeting in the spring of 2018.

Furthermore, the Council adopted a directive for resolving double taxation disputes within the EU. It strengthens the mechanisms used to resolve disputes between Member States that arise from the interpretation of agreements on the elimination of double taxation.

Commission calls for the completion of all parts of the banking union by 2018

On October 11th, the Commission published its plans to accelerate the completion of the missing parts of the Banking Union.

The Banking Union must be completed if it is to deliver its full potential in making the Economic and Monetary Union (EMU) more stable and resilient to shocks, while limiting the need for public risk sharing. Together with the Capital Markets Union (CMU), a complete Banking Union will promote a stable and integrated financial system in the EU that is beneficial for the entire Single Market.

In order to fast-track this completion of the banking union, the Commission urged the Council and the European Parliament to make progress in the negotiations on the comprehensive banking reform package that aims to address the remaining challenges to financial stability, as well as to enable banks to continue to fund the real economy. Additionally, the Commission is suggesting a more gradual introduction of the European Deposit Insurance Scheme with only two phases: a more limited reinsurance phase and then coinsurance.

The Communication also maps out rapid steps towards a last resort common fiscal backstop, ensuring the stability of the system and sufficient resources for the Single Resolution Fund (SRF), even in case of several simultaneous major bank resolutions.

Furthermore, the Commission aims to reduce the level of existing non-performing loans (NPLs) and prevent the build-up of NPLs in the future, as well as clarify the powers of supervisors in this matter. For this reason, the Commission is suggesting new measures to reduce non-performing loans and to help banks diversify their investments in sovereign bonds.

More information on the entire communication can be found here: https://ec.europa.eu/info/publications/171011-communication-banking-union_en

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