Select Committee on European Scrutiny Eighth Report



Amended draft Directive on the winding up of credit institutions.

Legal base: Article 47(2) EC; co-decision; qualified majority voting
Department: HM Treasury
Basis of consideration: EM of 5 March 2001
Previous Committee Report: None; but see (21209) — : HC 23-xviii (1999-2000), paragraph 16 (17 May 2000)
To be discussed in Council: 12 March 2001
Committee's assessment: Politically important
Committee's decision: Cleared; but further information requested on progress


  28.1  When an EU credit institution is subject to winding up proceedings a conflict of jurisdiction may arise between the home country (where the business is registered) and the host country (where a subsidiary operates). In 1985, the Commission proposed a draft Directive to deal with this overlap of jurisdictions. Our predecessors reported on this in 1986[67] and on an amended version in 1988. Progress on the proposal was, however, blocked for some years by the dispute between Spain and the UK over designating competent authorities for Gibraltar.

  28.2  The key principle of the Directive is that winding up proceedings should be governed, as with other EU banking Directives, on a home State basis; that is, the administrative and judicial authorities of the home country, as opposed to the host country, would have sole jurisdiction in winding up an institution and its branches across the EU. The Directive is identified as a priority area in the Commission's Financial Services Action Plan designed to complete the single market in financial services.[68] The purpose of the Directive is to simplify procedures and to allow faster, more efficient action across the EU to protect depositors, policy holders and other creditors. The opportunities for cross-border trade in financial services are expected to be enhanced when creditors are provided with a clearly established procedure throughout the EU.

  28.3  We reported on and cleared the Directive in May 2000. The Government subsequently signed up to political agreement on the Directive's text and the Council duly adopted a common position in July 2000.

The Government's view

  28.4  We have now received from the Economic Secretary to the Treasury (Miss Melanie Johnson) an Explanatory Memorandum of 6 March 2001 informing us of the latest developments. The Minister reports that during second reading in the European Parliament a number of amendments were proposed, which were subsequently accepted by the Commission and a majority of Member States. The Minister adds that the amendments, which are largely technical in nature, are broadly acceptable to the Government.

  28.5  Although the Directive has been under consideration for 15 years, it has made very little progress. The Minister points out that:

    "Its slow passage is often cited as evidence of lack of will amongst Member States that prevents the rapid completion of the single financial services market. As you know, the Government is especially committed to achieving this goal in the interests of fundamental economic reform and prosperity across Europe. In establishing clearer, more certain procedures for winding up credit institutions (on the rare occasions when that is necessary) the adoption of this Directive will mark a small but significant step towards attaining a single market. It is therefore important that the Government is seen to give the Directive its full support."


  28.6  We cleared the draft Directive in May 2000 and, given that the amendments are largely technical, see no reason not to clear the revised text.

67  (8283) 4177/88; see HC 21-xxix (1985-86), paragraph 5 (5 November 1986).  Back

68  (20175) 8329/99; see HC 34-xxiii (1998-99), paragraph 1 (23 June 1999). Back

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