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 European Sting Milestones

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

M360 Security for 5G: Security for 5G Predictions 2020, in association with The European Sting

United States: UN chief ‘deeply saddened’ by deadly California wildfires

Khashoggi case highlights ‘very worrying practice’ of overseas abductions, says UN expert

COP21 Breaking News: “There is an ecological debt that the world needs to pay back to Africa”, French President Francois Hollande promises 2 Billion euros by 2020 from Paris

Who is to lose from the 6-month extension of the EU economic sanctions against Russia?

Innovation for a smarter world: ITU Telecom World 2018

UN commission agrees roadmap on ensuring women’s social protection, mobility, safety, and access to economic opportunities

China is sending science students to live with rural farmers – and crop yields are skyrocketing

The von der Leyen Commission: for a Union that strives for more

Sudan military committed to ‘ensuring stability’ and ‘peaceful transition’ says senior diplomat, as UN rights chief appeals for protesters’ rights to be upheld

3 ways blockchain can revolutionize global supply chains

Eliminating hepatitis calls for ‘bold political leadership, with investments to match,’ UN health chief says

10 start-ups that are helping to change the Arab world

Time to say goodbye to the plastic straw. But what’s the best alternative?

Sustainable development demands a broader vision, says new OECD Development Centre report

Service and Sacrifice: Malaysian peacekeepers in Lebanon proud to serve their homeland and the United Nations

The Stray

JADE Romania Celebrates the 4th Anniversary

These are the world’s most tree-covered countries

The EU Commission fails to draw the right conclusions about corruption

‘Passport to dignity’ that schools represent may expire fast, without emergency funding warns UN Palestine refugee agency

EU Leaders’ meeting in Sofia: Completing a trusted Digital Single Market for the benefit of all

This is how trees could help solve the climate crisis

Our poisonous air is harming our children’s brains

EU: Tax evasion and fraud flourish under political protection

EU free-trade agreements with Canada and US: imagine the fallout if put to national referendums

Globalization 4.0 must build a better world for working people

Charlotte in Ghana

Dozens of children at risk as clashes in Hudaydah near hospital – UNICEF

Visa-free access to the EU for UK nationals and to the UK for EU nationals

Why your next work meeting should be a ‘walk-and-talk’

EU elections 2019: Trump’s share in the support of populism

European Agenda on Migration: Still fragile situation gives no cause for complacency

We must stop turning a blind eye to the world’s health crises

UN human rights chief denounces grave ‘assaults’ on fundamental rights of Palestinian people

250 days until the European Parliament elections

Want a more inclusive society? Start with mobility

How Africa’s entrepreneurs are changing the direction of globalization

European Banking Union: Like the issue of a Eurobond?

These are the world’s best universities by subject

Trump and Brexit: After the social whys the political whereto

UN chief condemns attack in south-west Iran which killed dozens

How will the EU face the migration crisis when the Turkish threats come true?

The key takeaways of G7 Summit in Canada

Draghi sees inflationary bubbles

As rural communities age, their public transport is shrinking. It’s time to fix this

Some progress made towards security in Mali, but still a long way to go, Security Council hears

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

A revolution, an ecosystem, an ocean: 5G is just the beginning

MEPs back EU partnership agreement with Armenia

Pesticides: MEPs propose blueprint to improve EU approval procedure

EU to manage external borders against the will of member states; Greece to be the first target

New UN-supported farming app is cream of crop in tackling Sahel pest

EU Parliament: No EU-US trade agreement without safe data

Lessons from the Global Entrepreneurship Index

FROM THE FIELD: Rohingya babies conceived out of ‘incomprehensible brutality’

Germany takes cover from Trump in Eurozone and decides to pay for it

GSMA Mobile 360 Series – Europe – 14 June 2016

‘Path to peace’ on Korean Peninsula only possible through diplomacy and full denuclearization: US tells Security Council

Service and Sacrifice: For Ghana, UN peacekeeping is a ‘noble opportunity to serve humanity’

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