A new proposal breaks the stalemate over the Banking Union

From left to right: Olli Rehn, Vice President of the European Commission, Yiannis Stournaras, Greek Minister for Finance, Michel Barnier, Member of the European Commission. Press conference after the ECOFIN Council of 28/1/2014. (The Council of the European Union photographic library).

From left to right: Olli Rehn, Vice President of the European Commission, Yiannis Stournaras, Greek Minister for Finance, Michel Barnier, Member of the European Commission. Press conference after the ECOFIN Council of 28/1/2014. (The Council of the European Union photographic library).

According to the European Commissioner Michel Barnier, the Eurozone member states, who participate in the Eurogoup and the ECOFIN councils are ready to soften their position in the negotiations with the European Parliament, to lift the deadlock over the creation of the Banking Union. This is a step forward in resolving the stalemate around the coverage of the cost of winding down or recapitalising failing banks and thus complete on time the enactment the European Banking Union. This is by far the most important project the European Union is about to accomplish, after the introduction of the common currency.

Barnier said that while participated together with his colleague Ollie Rehn and the Greek Minister of Finance Yiannis Stournaras, in the Press conference after yesterday’s key ECOFIN Council meeting. Greece holds the rotating Presidency of the Council for the first six months of this year. Stournaras is now mandated to open negotiations with the Parliament.

A conciliative ECOFIN

This change of stance and the adoption of a conciliative attitude by the ECOFIN Council vis-à-vis the European Parliament comes after a proposal by Benoît Cœuré, Member of the Executive Board of the European Central Bank. Last week he suggested cutting down from ten to five years the period needed to fully mutualise the responsibilities between the Eurozone member states, in relation to the coverage of the cost of winding down a failing bank. Even Wolfgang Schäuble, the German Minister of Finance and the main proponent of the ten year option, didn’t reject the five year proposal and commented that in order to achieve that, the banks have to speed up the process to fully capitalise a €55 billion bank rescue and resolution fund.

In this way, yesterday’s ECOFIN Council actually opened a new round of negotiations with the European Parliament. The legislators have almost unanimously rejected the 18 December decision of the ministers of Finance. All the major political groups of the Parliament have informed the ECOFIN Council in writing, that the House would remain adamant in support of a European Banking Union of equality, transparency and political impartiality.

The ECOFIN Council during its 18 December meeting decided that the cost of winding down a Eurozone bank will be covered almost exclusively by resources of the member state, where the bank is based. This arrangement will be in force for at least the first four to five years, after the Banking Union starts its operations. Then gradually the cost of winding down a bank will be progressively shared by all member states and only in the tenth year the national resolution funds will merge into one.

2025 is too far away

On the insistence of Germany, at that meeting the ECOFIN also decided that all this will be arranged through an Intergovernmental Conference and Agreement, which will set the rules for the Resolution Fund for failing banks. This Intergovernmental option is a procedure completely outside the EU standards and actually it’s the equivalent of a common international agreement between a number of countries.

Last Monday the European Sting writer Dennis Kefalakos wrote “The idea behind this Intergovernmental Conference – being convened in order to decide the details of the Resolution Fund for Eurozone’s failing banks – is that Germany doesn’t accept a uniform winding down procedure for all banks. The Resolution Fund is the key instrument in the whole affair of the Banking Union. It will also define the scope and the functioning of the Resolution Mechanism and the thereupon, the effectiveness and the credibility of the entire European Banking Union”.

Change of attitude

In this line of thinking, the ECOFIN Council so far insisted that the Resolution Funds will remain a national affair for the next five years and only after the sixth year will they start to merge. The full merger of the national Resolution Funds into one, covering the entire Eurozone will be achieved after ten years sometime in 2025. Berlin’s target is that during the next five years every country will be responsible for its own banks. In view of all that, the European Parliament remains adamant and almost unanimous in its position not to accept the Intergovernmental, because, among other things, it sidesteps completely the legislative and the Commission.

Now, Benoît Cœuré proposes to cut down from ten to five years the period needed to fully mutualise between the euro area member states the responsibilities, which may arise from a failing bank. Correspondingly, the ‘every country for itself’ period will be cut down to two and a half years. This is a time interval that could be discussed between the Parliament, the Council and the Commission. The problem is that the banks will have to create this resolution and recapitalisation fund of €55bn five years earlier.

The ECB breaks the stalemate

However, Cœuré wouldn’t have proposed this shortening of the adjustment period, if he didn’t have indications about the ability of Eurozone’s 6,000 banks to manage that. Not to forget that the ECB is currently assessing the balance sheets of the 130 largest Eurozone banks which account for 85% of the entire banking system of the euro area. Despite the fact that those banks probably need badly more capital for themselves, their obligation to create this resolution and rescue fund for their own flock is a higher priority for the entire system than the capitalisation of each bank individually.

All in all some billions won’t block the ability of Eurozone to create a well functioning and credible Banking Union.







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

Mobility in 2020: a female perspective

Now is the time to seize ‘unprecedented opportunity’ of the Sustainable Development Forum, says ECOSOC President

The countries most ready for the global energy transition

Europe’s top court hears Intel and sends € 1.06 bn antitrust fine to review

Is this a turning point in the fight against slavery?

Pedro Sánchez: We must protect Europe, so Europe can protect its citizens

EU Facility for Refugees in Turkey: third annual report shows continued vital and tangible support for refugees and their host communities

Neelie Kroes at the European Young Innovators Forum: Unconvention 2014

Draghi tells the EU Parliament his relaxed policies are here to stay

Electronic Cigarettes: Are they really as safe as we think?

Palestinian Bedouin community faces demolition after Israeli court ruling, warns UN rights office

How to provide health education and thus create better health systems

Who is to profit from the quasi announced ECB rate cut?

Ideology is the enemy of growth

This is Amsterdam’s ambitious plan to turn its transport electric

LGBTQI+ and health care: do they deserve more attention from medical universities?

Financing fossil fuels risks a repeat of the 2008 crash. Here’s why

Africa’s future is innovation rather than industrialization

Passwords should become a thing of the past. Here’s why

Germany tries to save Europe from war between Ukraine and Russia

Education critical to ensure future of forests, and reverse their destruction

Security Council urged to help spare Syrians from ‘devastation’

The EU Parliament unanimously rejects Commission’s ideas about ‘seeds’

Charles Michel advocates a strong Europe that acts where it can add real value

How the United States is falling in love with secondhand clothes

The hostilities in south and eastern Ukraine resume; where could they lead?

Lessons in disaster relief from the world’s most cyclone-battered state

The link between migration and technology is not what you think

Finnish Prime Minister calls for a more united EU of concrete actions

EU investment budget for 2020: A boost for the climate

3 ways to accelerate the energy transition

We need to bin disposable items for good. Here are 5 ways to do it

What we need for a better European Solidarity Corps

Mergers: Commission clears Vodafone’s acquisition of Liberty Global’s cable business in Czechia, Germany, Hungary and Romania, subject to conditions

5 ways governments can unleash the power of young entrepreneurs

Asian and Pacific economies: decreases in tax revenue highlight need to broaden tax bases

Russia’s permafrost is melting and it could have a devastating global effect

Migration policy affects attractiveness of OECD countries to international talent

Can medical students be prepared for Global Health ethical issues?

Europe to turn the Hamburg G20 Summit into a battlefield

Here’s how to make ‘value-based healthcare’ a reality

Could switching between summer and winter time end in 2021?

UN appeals for international support as flood waters rise in wake of second Mozambique cyclone

French full-body veil ban, violated women’s freedom of religion: UN Human Rights Committee

A brief history of cryptography and why it matters

All talk but no action against fraudulent bankers

UN envoy commends successful conclusion of Guinea-Bissau presidential election

5 reasons to be more cheerful about the future of the oceans

Parliament proposes policy toolbox to curb air pollution

GSMA Announces New Speakers for Mobile 360 Series – Middle East and North Africa

Election 2019: New, Updated seat projection for new Parliament

This top-10 of business risks misses the biggest of them all: climate change

EU Border and Coast Guard: new corps of 10 000 border and coast guards by 2027

Eurozone stagnates after exporting its recession to trading partners

So, what is your favourite Sustainable Development Goal?

This is how we can empower 8 billion minds by 2030

Thursday’s Daily Brief: ambulance attack in Libya, #GlobalGoals defenders, human rights in Cambodia, Swine Fever

One billion people have preventable eye conditions, increasingly linked to lifestyle choices: UN health agency

US-North Korea summit in Singapore ‘a promising development’ says Guterres

EU Council agrees to reform the system for motor vehicles but with “restricted” power for the Commission

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