Tags: union | eurozone | economy | banking

EU Ministers Seek to Lower Differences Over Banking Union

Friday, 15 November 2013 06:27 AM EST

EU finance ministers met to make a fresh bid Friday to narrow differences over "Banking Union," a new framework meant to prevent a repetition of the financial meltdown that plunged Europe into crisis.

Having last month approved a first step in the plan, the Single Supervisory Mechanism to oversee eurozone banks, the ministers were expected to meet late into the day in difficult efforts to agree on a Single Resolution Mechanism by year's end.

"I don't expect a conclusive decision today," said French Finance Minister Pierre Moscovici.

He hoped that the talks with his 27 EU counterparts would enable them "to outline the major stakes, the initial contours of a compromise."

His Luxembourg counterpart Luc Frieden said that "today we need to listen to what each one has to say" but "there's no point in hoping to conclude because the positions are still too far apart."

The SRM would serve to close failing banks and would also need to be complemented by a deposit guarantee regime to protect savers.

Combined, the three pillars of the scheme will provide a unified regulatory framework intended to prevent taxpayers from paying for disastrously expensive bank bailouts which led to years of austerity and recession in the eurozone.

These issues are highly complex and highly sensitive, partly because they affect national sovereignty over a large slice of the critically important financial sector.

The SSM was 13 months in the making due to sharp differences over its precise role and the resolution mechanism is proving even more controversial than the SSM supervision.

Powerhouse Germany notably is reluctant to cede control of its banks.

And along with some other nations, Germany is opposed to the EU executive, the European Commission, being given the authority to decide whether to save or to liquidate a struggling bank.

It favors handing that authority to the European Union Council, which repesents the 28 governments.

The EU's second economic power France on the other hand believes the Commission would be best placed due to its rapid response capability. Paris and Belgium notably dealt with the collapse of Dexia bank over a single weekend.

EU nations, too, differ over the scope of the banking sector to be placed under the framework, with France wanting to embrace all of Europe's banks while Germany calls for supervision of only the top 130 banks.

Paris, the Commission and the European Central Bank all agree on the need for a single resolution fund while Berlin has called for a network of national funds.

"I would not expect that we can finalize the dossier today," said ECB board member Jorg Asmussen. But "I expect that we can lower down the differences that still exist."

To put the banking union scheme in place by 2015 as planned, Asmussen said there must be a decision on SRM by year's end because it will still need to be approved by the European Parliament, whose mandate ends in April.

© AFP 2024

EU finance ministers met to make a fresh bid Friday to narrow differences over Banking Union.
Friday, 15 November 2013 06:27 AM
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