EU Commission challenges Berlin by proposing breakthrough legislation on banks

Michel Barnier, Member of the EC in charge of Internal Market and Services participated in the 4th Annual Economic Forum in Helsinki, (EC Audiovisual Services, 7/6/2013).

Michel Barnier, Member of the EC in charge of Internal Market and Services participated in the 4th Annual Economic Forum in Helsinki, (EC Audiovisual Services, 7/6/2013).

In an inspired speech last Friday, in Helsinki the European Commissioner Michel Barnier, speaking at the 4th Annual Economic Forum, made crystal clear that the Commission has not abandoned the target of a strong and effective European Banking Union. He stressed that “We cannot have a genuine Economic and Monetary Union without a Banking Union”. Of course he clarified that this new EU institution will also make sure that the umbilical cord between the major national banks in certain member states and the sovereigns is cut off.

The Centre for European Studies, a Brussels think tank, close to the European People’s Party, organised during the Forum a conference entitled, “Banking sector, finance and regulation: a strong pillar for the real economy”. The EU Commissioner participated in it and delivered a speech entitled “Financial regulation: laying sound foundations for stability and growth in Europe”. This tribune was the best opportunity for Michel Barnier to address the burning issue of the EBU and more precisely the single bank resolution authority and the single bank resolution mechanism.

A breakthrough

This issue has become a core theme for those like Barnier, who want a genuine EBU guaranteeing that the more than 6,000 Eurozone banks are being supervised effectively and can be trusted as guardians of value and effective financial intermediaries. He said that in the new and more controlled and demanding but safer financial environment of the EBU, it has to be ascertained that the Eurozone’s banks would be able to serve the real economy and more so the small and medium enterprises, securing financial services, “In particular to SMEs, which are highly dependent on bank financing”.

He commenced his speech by taking stock of the work that has been done so far for the banking union. He mentioned the agreement between the EU Parliament, the Commission and the Councils over the Capital Requirements Directive, the so-called ‘CRD IV package’, applicable in all 27 member states. He continued however and observed that this is not enough for Eurozone, obviously because the 17 euro area countries operate in a single currency union. In this environment however the countries of the south are disadvantaged, because they were not accustomed to a strong currency environment and today they are almost completely cut off from the core Eurozone financial markets. As result their real business sector and particularly their SMEs are suffocated without financial backing.

At this point Barnier found the opportunity to make a crucial announcement stating that “We (the Commission) will propose a Single Resolution Mechanism this summer”. He also announced that “for countries belonging to the Banking Union, we need to establish a common resolution fund. With one centralised resolution authority”.
By this statement he totally opposed the opinion expressed by the German Minister of Finance Wolfgang Schäuble, who insists that the enactment of a central resolution authority presupposes a change in the EU Treaty, let alone the establishment of a common resolution fund. Actually this problem is a very real one, because a common bank resolution fund would mutualise the risks hidden in the balance sheets of all Eurozone lenders. The Commission believes though that such a fund can be created without a change in the EU Treaty, and they argue that it can be fully embedded in the EU legal framework afterwards.

One real banking union

Before that Barnier had observed that the supervision of Eurozone banks by the European Central Bank “will open the possibility for the European Stability Mechanism to recapitalise ailing banks”. This is of course another bugbear for Germany, because Berlin bluntly denies sharing directly the Spanish, Greek, Italian and French bank risks through the ESM. Up to now the ESM is recapitalising the Greek, Spanish and Irish banks, but through loans to the corresponding governments, thus making the sovereigns liable for the risks and the money to be returned .

In this line of thinking Barnier also confirmed that the “Directive on Bank recovery and resolution. I hope it will be adopted in the next few days”. This is the new legal text defining the use of funds in cases of bank resolutions. By this statement Barnier confirmed what was already known, that is the order of funds to be confiscated in bail-ins. He said “shareholders, creditors and all other parties need to know in advance what to expect; while making sure that deposits under 100,000 Euros stay protected”. This is what happened in Cyprus at a time when this Regulation was not yet approved.

All in all Barnier confirmed that the European Commission will not back off in front of the German obstinacy. Actually the Commission in this affair is not following the usual practice of holding back action, which could damage the electoral prospects of a government. In this case the proposed mutualisation of banking risks for all Eurozone countries is a very unpopular issue in Germany. Obviously this Barnier announcement, if exploited by the opposition, may hamper Chancellor Merkel’s prospects for a triumphant win in the September election.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

On Kristallnacht anniversary, UN chief urges renewed fight against ‘crime’ of anti-Semitism

Brexit may finally not really happen; The Brits have second thoughts

EU-UK: A deal synonymous to ‘remain’, England pays the Irish price

DR Congo: Strengthened effort against Ebola is paying off, but insecurity still major constraint – UN health agency

Top UN officials strongly condemn ‘horrible terrorist act’ in Nairobi

Minsk “ceasefire” leaves more doubts than safety, with EU already planning steps further

Building an Inclusive ICT Innovation Ecosystem

Zeid calls for ICC probe into Myanmar Rohingya crisis

Google and Apple suddenly realise that doing business in EU is tough?

Betazone: The Beauty of Inclusion

Protecting farmers and quality products: vote on EU farm policy reform plans

Anti-vaccine sentiment one of 10 biggest health threats, says WHO

SPB TV @ MWC14: The TV of the Future

How do we really feel about women leaders?

Annual UN women activists’ summit opens with focus on services, infrastructure

Million across Yemen ‘just a step away from famine’, with food available but inaccessible

Industrial price dive may lead to point of no return

How’s Life? reveals improvements in well-being but persistent inequalities

The future of crypto-assets, from opportunities to policy implications

It’s time we took a seat ‘at your table’: Guterres calls on world youth to keep leading climate emergency response

ECB offers cheaper money despite reactions from Germany

Modern humanitarian aid at times of global crises

Take action on air pollution to save lives, and the planet, urges UN chief

Mosul’s ‘3D contamination’ adds to challenges of deadly mine clearance work

Costa Rica is one of the world’s happiest countries. Here’s what it does differently

UN chief welcomes South Sudan’s Unity government, lauds parties for ‘significant achievement’

Africa-Europe Alliance: first projects kicked off just three months after launch

The importance of Yellow September and suicide prevention in Brazil

Commission concludes that an Excessive Deficit Procedure is no longer warranted for Italy at this stage

TTIP fight round 6: last chance for the negotiators to finally open up as they touch the Brussels ring

UN global counter-terrorism strategy review an ‘overarching vision for the future’: Assembly President

Connected Claims returns to London in 2018

Top UN rights official urges transparent probe into Khashoggi disappearance

How to change the world at Davos

Who really cares about the 26.2 million of EU jobless?

Commission proposes fishing opportunities in the Atlantic and North Sea for 2019

Businesses are thriving, societies are not. Time for urgent change

Where will evolution take us in the Fourth Industrial Revolution?

At UN, youth activists press for bold action on climate emergency, vow to hold leaders accountable at the ballot box

Aid used for trade is helping developing countries diversify

Negotiations on Investment Facilitation at the WTO gain support at Davos

This AI can predict your personality just by looking at your eyes

5 ways Denmark is preparing for the future of work

Italy’s Letta: A European Banking Union soon or Eurozone collapses

Ukraine: Temperatures plunge amid rising humanitarian needs

Do doctors need to know their patients’ sexual orientation and gender identity?

Millions of Bangladeshi children at risk from climate crisis, warns UNICEF

Brexit update: Tusk’s proposal is out and Cameron takes it all

This new way of understanding disease is changing medicine

Palestinian children’s education deeply impacted by ‘interference’ around West Bank schools, UN warns

Most ‘precious’ and ‘scarce’ resource of our time is dialogue, UN chief tells Doha policy forum

Tuberculosis infections declining, but not fast enough among poor, marginalised: UN health agency

Non-performing loans: banks need to mitigate the risk of potential losses

10 million Yemenis ‘one step away from famine’, UN food relief agency calls for ‘unhindered access’ to frontline regions

Mental health and suicide prevention – What can be done to increase access to mental health services in my region?

Plants, the ‘core basis for life on Earth’, under increasing threat, warns UN food agency

Will Merkel ever steer the EU migration Titanic and restore her power in Germany?

Humanitarian crisis in Yemen remains the worst in the world, warns UN

Tips for investor engagement in emerging markets

‘Emulate his example’ urges UN chief as world celebrates Nelson Mandela: a ‘global advocate for dignity and equality’

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s