Germany gives green light for banking union plans
Germany's cabinet has approved a package of draft laws which effectively give the go-ahead to Europe's plans for banking union - the main confidence-building response to the crisis in the financial sector, a government source said yesterday.
The European plans will mean there is one supervisor for euro zone banks, one set of rules to close or restructure troubled banks and one pot of money to pay for everything.
That will reduce the importance of the Central Bank here as the ECB will soon have responsibility for lenders such as Allied Irish Banks and Bank of Ireland.
To minimize the expense to euro zone taxpayers, European Union policymakers have drawn up a law under which shareholders, creditors and very large depositors will lose money first in the event of a bank failure.
Under the German draft law, creditors and owners of failing German banks will face losses from as early as 2015, a year before European rules are envisaged for the whole bloc.
The European Central Bank will begin supervision of big banks across the 18 countries that use the euro later this year in a first step in banking union.
The next step will be a common approach to preventing banks in trouble from dragging down governments in euro zone states to prevent what happened here in Ireland being repeated elsewhere. That is still a work in progress.
Another law in the package ensures Germany is in line with EU rules that allow the European Stability Mechanism to recapitalise banks directly under certain circumstances.
Germany needs to pass the laws to implement Europe's banking union plans.
Creditors and owners of failing German banks will face losses from as early as 2015, a year before European rules envisaged for the bloc as a whole.