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BackIf the EU Commission had its way, one would soon see the creation of a comprehensive banking union within the EU - and much faster than previously thought. Last week already, the authority suggested EU-wide provisions to restructure and liquidate banks. Taxpayers should no longer have to foot the bill for failed banks. Now Commission President Barroso demands the implementation of a banking union in the form of an EU supervisory authority for Europe’s largest banks, common deposit guarantee and rescue fund for the next year already.
Troubled banks have badly affected national budgets all over Europe. From October 2008 to October 2011, the EU Commission granted the incredible amount of EUR 4.5 trillion in State aid to ailing financial institutes. And the latest request for aid by Spain to recapitalise her banking sector has clearly shown that the banking crisis is far from being over.
Amidst of these crisis phenomena, the debate in respect of a “banking union” is increasingly gaining speed. Barroso presented the idea at the last informal summit of the EU Heads of State and Government on 23 May. What a banking union as a central pillar of deepened economic and monetary integration might look like shall be outlined in a report, which the President of the European Council, the Commission President, the Eurogroup chairman and the President of the European Central Bank want to present at the coming EU summit at the end of June.
Last week, the Commission suggested measures, which are to present a step towards a banking union. For example, a number of preventive provisions shall ensure that in future ailing banks will no longer put critical functions or the financial stability at risk or have to be bailed out by taxpayers. Apart from that, authorities shall be able to intervene at an early stage when financial problems arise. Supervisory authorities would also have the option to appoint a temporary special administrator if the financial situation of an institution is particularly bad. If banks fail nevertheless, liquidation instruments and powers should be harmonised in such a way that the supervisory authorities of the Member States have common instruments at their disposal to manage the failure of banks.
The proposal also specifies that all Member States set up liquidation funds, into which the banks shall pay one percent of the deposits within ten years. With regard to the liquidation of banks that engage in cross-border activities, the national liquidation funds shall grant each other mutual support.
Barroso wants banking union already next year and without changing existing EU Treaties
Commission President Barroso is now applying pressure to no longer take only small individual steps but to take the plunge. In an interview with the “Financial Times” this week, he said that the EU had to take a “very big step” towards deeper integration if the EU is to learn from the debt crisis. Barroso is in favour of a banking union where the big banks of all 27 EU countries should be subject to a single cross-border supervisor. The Commission President would also like to see the realisation of an EU-wide deposit guarantee scheme and a rescue fund paid for by levies on financial institutions.
In order not to have his vision postponed to the distant future, Barroso wants to implement the plan without changing the existing EU Treaties. Its adoption has been planned for next year already.
However, the plans of the EU Commission are met with fierce opposition from Germany and Great Britain. In particular the planned common deposit guarantee is a torn in the side of the German government. The concerns to be held liable for the deposits of failed Greek and Spanish banks are too big. The UK has made it clear that it should not join a banking union, where British taxpayers would have to foot the bill for recapitalising Eurozone banks or where big British Banks would be subject to an EU supervisor.
In his speech in the plenum of the EU Parliament this week, Barroso reinforced his appeal for a banking union as well as a fiscal union. The Commission plans to present legislative proposals on the union of the banking sector by the autumn.
Additional information:
Press release “New crisis management measures to avoid future bank bail-outs”
Memo “The banking union” (in English)
Amidst of these crisis phenomena, the debate in respect of a “banking union” is increasingly gaining speed. Barroso presented the idea at the last informal summit of the EU Heads of State and Government on 23 May. What a banking union as a central pillar of deepened economic and monetary integration might look like shall be outlined in a report, which the President of the European Council, the Commission President, the Eurogroup chairman and the President of the European Central Bank want to present at the coming EU summit at the end of June.
Last week, the Commission suggested measures, which are to present a step towards a banking union. For example, a number of preventive provisions shall ensure that in future ailing banks will no longer put critical functions or the financial stability at risk or have to be bailed out by taxpayers. Apart from that, authorities shall be able to intervene at an early stage when financial problems arise. Supervisory authorities would also have the option to appoint a temporary special administrator if the financial situation of an institution is particularly bad. If banks fail nevertheless, liquidation instruments and powers should be harmonised in such a way that the supervisory authorities of the Member States have common instruments at their disposal to manage the failure of banks.
The proposal also specifies that all Member States set up liquidation funds, into which the banks shall pay one percent of the deposits within ten years. With regard to the liquidation of banks that engage in cross-border activities, the national liquidation funds shall grant each other mutual support.
Barroso wants banking union already next year and without changing existing EU Treaties
Commission President Barroso is now applying pressure to no longer take only small individual steps but to take the plunge. In an interview with the “Financial Times” this week, he said that the EU had to take a “very big step” towards deeper integration if the EU is to learn from the debt crisis. Barroso is in favour of a banking union where the big banks of all 27 EU countries should be subject to a single cross-border supervisor. The Commission President would also like to see the realisation of an EU-wide deposit guarantee scheme and a rescue fund paid for by levies on financial institutions.
In order not to have his vision postponed to the distant future, Barroso wants to implement the plan without changing the existing EU Treaties. Its adoption has been planned for next year already.
However, the plans of the EU Commission are met with fierce opposition from Germany and Great Britain. In particular the planned common deposit guarantee is a torn in the side of the German government. The concerns to be held liable for the deposits of failed Greek and Spanish banks are too big. The UK has made it clear that it should not join a banking union, where British taxpayers would have to foot the bill for recapitalising Eurozone banks or where big British Banks would be subject to an EU supervisor.
In his speech in the plenum of the EU Parliament this week, Barroso reinforced his appeal for a banking union as well as a fiscal union. The Commission plans to present legislative proposals on the union of the banking sector by the autumn.
Additional information:
Press release “New crisis management measures to avoid future bank bail-outs”
Memo “The banking union” (in English)