A week to decide if the EU is to have a Banking Union

Ioannis Stournaras, Greek Minister for Finance and President of the ECOFIN Council signs documents. (Council of the European Union photographic library, 18/2/2014).

Ioannis Stournaras, Greek Minister for Finance and President of the ECOFIN Council signs documents. (Council of the European Union photographic library, 18/2/2014).

This Monday and Tuesday, 10 and 11 March during the Eurogroup and the ECOFIN meetings respectively, the member states will show their willingness to compromise with the Parliament, in order to finalise the legal base of the European Banking Union. This would be the most important EU project after the common currency. The Banking Union will guarantee that Eurozone banks are closely and effectively monitored and supervised by the European Central Bank using standard and clear supervision rules. It will also make sure that in case the supervisor finds that a lender is near a failure, there will be a uniform and pertinent resolution procedure in place, with standard and transparent rules for the line of bailinable funds. This process will also guarantee the existence of extra resources to accomplish the resolution or the recovery procedure.

Footing the capital bill

While the mandate and the rules the ECB is to use in its supervision role are in place and the Bank Recovery and Resolution Directive is already in force, the member states, as expressed by the ECOFIN council cannot agree with the Parliament and the Commission on the coverage of the cost of eventual bank failures during the next two or three years. Before the official establishment of the Single Supervisory Mechanism under the ECB in autumn 2014, last October the central bank commenced an exercise. This operation, which will last twelve months, is testing the quality of assets and the resilience of Eurozone’s banks under stress. Those tests will certainly reveal large needs in new capital for Eurozone banks.

Already the four largest Greek banks are estimated to need anything around €6 billion in new capital. If the capital markets appear reluctant to cover the new capital needs, the funds have to be secured form other resources presumably of public character. It is exactly these capital needs (resolution and recovery funds) and the procedure to finance them (single resolution mechanism) that have now become the point of controversy between the Parliament and the ECOFIN council. To answer this question the European Commission has proposed a Single Resolution Mechanism (SRM) for the Banking Union which includes a single resolution board and a single resolution fund to tackle future bank crisis with minimal costs to taxpayers and the economy.

Last minute dealings

The member states insist that the final decision to resolve a bank rests with the ECOFIN and also that the resolution funds remain a national affair at least for the next five years, until the ECB supervision could guarantee that no bank is near to failure. On top of that, the ECOFIN has introduced an Intergovernmental Conference and Agreement which will decide on the use of the resolution funds with procedures outside the EU structures. This process will be controlled only by member states without the intervention of the Parliament or the Commission.

Two weeks ago, the Greek Presidency of the ECOFIN council received a mandate from member states to negotiate with Parliament on these issues. However, the mandate didn’t leave much space for negotiations and the MEPs “restate that they will not sign up to a system with serious and evident flaws”. Their main concern is that the resolution mechanism as proposed by the Council leaves ample room for unequal treatment of banks, according to their country of origin. On 6 March, the European Sting writer Suzan A. Kane noted that ‘ The legislators point to the Council that “Resolution actions concerning a specific bank should be decided only at the executive board level to avoid political power-games and ensure that banks receive equal treatment, irrespective of their country of origin. A role for the Council in decisions on a bank’s resolution must be avoided” ’.

No much time left

Now the Greek Presidency asks for a new proxy, with wider negotiating powers in order to start the talks with the Parliament again. Towards this end, the Greek Presidency yesterday issued a Press release asking the ECOFIN for a new authorization. It reads “As regards the proposal for a Regulation on a Single Resolution Mechanism for banks (SRM), the Council will be called to revise the mandate given to the Presidency, with a view to finalising negotiations with the European Parliament at the next trilogue”.

Everybody agrees though, that the whole issue has to be settled within this legislature, so as the Parliament could pass the new Regulations in April before it is resolved ahead of the May elections. In view of that, the coming week will be very decisive regarding whether Eurozone is to have a Banking Union. Finally, it’s worthwhile mentioning that the non-Eurozone EU members can join the Banking Union if they accept its principles.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

Could play be a game-changer for the world’s forests?

Five years down the drain

European Youth Forum welcomes steps towards raising awareness of youth rights by EU ministers

How fixing broken food systems can help us meet all the SDGs

How can we build a workforce for our digital future?

The Collapse of the Brazilian Health Care System

Conflict, climate change among factors that increase ‘desperation that enables human trafficking to flourish’, says UN chief

EU/Africa, Caribbean and Pacific: towards which partnership?

Gender Science: A sneaky healthcare risk factor

Investment, not debt, can kick-start an entrepreneurial Europe

Memoirs from a unique trip to China: “my new old dragon” (Part II)

ECB doesn’t dare touch Eurozone’s big banks

From Shadows to Sunlight, Paraguay’s Road to Transparency

European tourism remains a strong growth factor

Britain heading to national schism on exit from EU

Medical research: between progress and speculation

To improve women’s access to finance, stop asking them for collateral

These are the next big products in consumer technology

Future EU farm policy: Agriculture MEPs urge fair funding, no renationalisation

FROM THE FIELD: Changing world, changing families

‘Terrorist Iranian regime’ must be checked; Saudi Foreign Minister urges financial pressure

The digital transformation is a skills and education opportunity for all. Companies must use it

Human rights breaches in Bangladesh, Cuba and Vietnam

Malaysia can show the way towards a holistic model for human rights

These rules could save humanity from the threat of rogue AI

Austerity lovers to put a break on Renzi’s growth vision for Europe? the Sting reports live from World Economic Forum 2015 in Davos

Parliament supports plans to improve quality of tap water and cut plastic litter

Why do humanitarian crises disproportionately affect women?

Pakistan: a long road ahead

GREXIT final wrap-up: nobody believed Aesop’s boy who cried wolf so many times

Another doomed EU attempt to interfere in Libya?

EU continues targeting on Chinese steel imports instead of the revival of its own economy

Superconductors: the miracle materials powering an energy revolution

Google’s bare truth: Europe’s Chief denies EU accusations but admits they “don’t always get it right”

GSMA Mobile 360 – Digital Societies in Kuala Lumpur, in association with The European Sting

Utmost hypocrisy emitted by EU’s energy regulation

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

Do academia and banks favour a new Middle Ages period?

Obama, Crimea and the TTIP pill

Central Africa: Security Council concerned by ‘grave security situation’, calls for better agency cooperation

Somalia’s population, international partners must be energized to sustain country’s ‘upward trajectory,’ says senior UN official

UN chief welcomes ‘positive steps’ towards peace between Eritrea and Ethiopia

4 climate tipping points the planet is facing

In Christchurch, UN chief calls for tolerance, solidarity to extinguish ‘wildfire’ of hate speech

Hopes for Palestinian State hit by ‘facts on the ground’ : senior UN official

Resettlement needs set to rise to 1.4 million people in 2019, UN refugee agency reports

Schaeuble wants IMF out and bailouts ‘a la carte’ with Germany only to gain

European Parliament speaks out against “killer robots”

The hidden cost of the electric car boom – child labour

Teamgum @ TheNextWeb 2014

Five things everybody needs to know about the future of Journalism

Rights defenders jailed in Bahrain and UAE should be released unconditionally, UN urges

Q&A on the 19th China-EU Summit to be held on 01-02 June 2017 in Brussels

MEPs want robust EU cyber defence and closer ties with NATO

Galileo funding: A ‘small’ difference of €700 million

How we can embrace the electrical vehicle transition by adopting smart charging

Europe must regain its place as world leader in digital technology

DR Congo Ebola outbreak now a Public Health Emergency, UN health agency declares

India-UN fund gets 22 development projects off the ground in first year

Mozambique’s Beira city ‘returning to life’, elsewhere UN teams assess damage, deliver assistance

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