Tuesday 24 October 2017

Eurozone ministers brace for drawn-out fight over bank rules

European Union Economic and Monetary Affairs Commissioner Olli Rehn listens to Ireland's Finance Minister Michael Noonan (R) during a eurozone finance ministers meeting in Brussels
European Union Economic and Monetary Affairs Commissioner Olli Rehn listens to Ireland's Finance Minister Michael Noonan (R) during a eurozone finance ministers meeting in Brussels

Jan Strupczewski

EUROZONE finance ministers face difficult talks over their plans for a banking union today, including how to pay for the winding up of troubled banks, a deeply divisive issue on which Germany has dug in its heels.

The aim is for ministers to reach agreement, so that EU leaders can sign off on it at a summit taking place tomorrow and Friday. But already officials are warning that an extra finance ministers' meeting may be necessary at the end of December if a deal cannot be reached this week.

Discussions over a banking union have already dragged on for the best part of a year and show few signs of getting any easier or less complicated.

Ministers have already agreed on the first plank of the plan, which involves making the European Central Bank the single supervisory authority for the region's largest banks. The ECB is on target to take over that role from the end of 2014.

But the second plank, which involves creating a single authority for winding up or resolving problems in the region's banks, alongside a single fund for financing resolution, is proving even more cumbersome and challenging than the first.

Germany, the eurozone's largest economy, has raised the greatest concerns about the resolution fund, which it fears is a major step towards mutualising risk across the eurozone.

Ministers may decide to sidestep the thorniest issues for now so as to reach a general political agreement and stick to an ambitious timetable for the banking union project to start in 2015.

"You don't need to have full agreement on every detail to have political agreement on a Single Resolution Mechanism," one EU official said.

Banks themselves will provide the cash needed to finance the winding down of failed lenders through annual contributions to a Single Resolution Fund that, in total, are to reach €55bn over 10 years.

But ministers cannot yet agree on what happens if, in some extreme case, more money is needed than has accumulated in the single fund.

Under the latest proposal, the cost of closing down a eurozone bank will initially be borne almost fully by its home country. The obligations of eurozone partners will only gradually rise to be shared equitably after a decade. (Reuters)

Irish Independent

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