Wednesday 13 December 2017

Governments still at odds as deadline looms on banking deal

Jim Brunsden

European Union finance ministers are still at loggerheads over what to do when banks fail.

The ministers will grapple next week over how far the eurozone should standardise its approach to writing down failing banks' creditors as they seek agreement on a blueprint to end state bailouts.

While there is a "broad measure of agreement" on the draft's suggestions for how creditors should suffer, governments have just over a week to resolve their differences before the ministers convene in Luxembourg, according to an EU document prepared for the meeting.

The countries are divided over how much flexibility regulators should be given to exempt some creditors from writedowns, according to the document prepared by Finance Minister Michael Noonan.

RESOLUTION

EU's governments are racing to meet an end-June deadline to agree on the plans, which leaders have said will be a first step towards more ambitious moves to centralise bank interventions in the 17-nation euro area.

Agreement would be a rare victory for Ireland's presidency which is set to end this month with few obvious successes.

Under draft plans presented by Michel Barnier, the EU's financial services chief, losses at a bank would be absorbed first by wiping out its capital, then writing down unsecured debt holders in order of seniority.

Individual countries would also be required to build up standing funds that would be tapped to cover restructuring costs at failed lenders. These resolution funds would be financed with levies on banks.

Countries are also split over whether the bail-in powers should take effect in 2015 or 2018. (Bloomberg)

Irish Independent

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