European Banking Union: no one is perfect

michel barnier 2014

Michel Barnier, Member of the European Commission in charge of Internal Market and Services (EC Audiovisual Services)

Europe came to an agreement last Thursday 20 March to complete the second pillar of the European Banking Union with the establishment of the Single Resolution Mechanism (SRM). After months and months of negotiations between the European Parliament and the member states, Europe will have as of now the relevant legislation and the mechanisms to function a banking union.

Thus the most challenging and ambitious integration project since the creation of the European Union was finalized last week. After hours of intense negotiations, the European parliament and the EU member states agreed to the creation of a single system to handle a potential banking crisis in Europe.

The authority that was given to the European Central Bank for supervision was the first step towards the banking union. It is believed that the Single Supervision Mechanism (SSM) under the ECB will be tougher and more independent. “The SRM would apply to all banks supervised by the SSM”. The Single Resolution Fund has a target of €55 billion and all banks will contribute. The accumulation of the resources will be over a period of 8 years.

This is earlier than the initial 10 years of the plan, but still far longer than the target ECB envisaged. The funds that are needed for the first year are 40% of the final target, which means that the bigger proportion of the money is needed in the first years. While the Fund is a very essential step for the completion of the banking union in Europe, there are concerns though that it is not big enough to cover the needs of the banks that need to be ‘shut down’.

The ECB will be the institution responsible to sign the alarm when a bank is failing. After that the Commission, the Board and the national resolution authorities will take part in the decision-making process for the further steps that would be needed to take.

Despite the fact that the participation of many different interest groups is very important in any democratic procedure, the big number of decision makers will possibly make the decision-making process inflexible and time consuming. Time is very important when we have to deal with bank ‘closures’. In order to avoid a banking chaos in the market, this procedure should be put on paper during the weekend. It is very difficult for that many conflict decision-makers to agree to the resolution of a bank in such a short period of time.

Germany was, as always, opposed to anything that involved mutualisation of obligations, because it didn’t want its taxpayers to pay one euro for the failure of other European banks. However, Germany and the other members had to come to a compromise, in order to agree for the creation of the SRM.

One important reason for the ‘rush’ to come to an agreement now and not in June, is nothing else but the coming European elections in May. Everyone in Brussels is afraid that the political scene may change after the elections and then it would be difficult for any similar challenging proposal to pass. Hence, there was a tremendous pressure to all the involved parties to conclude to a proposal for a banking union now, even not a ‘perfect’ one.

Besides, the ‘imperfection’ of this banking union was also recognized by the EU Commissioner for the Internal Market and Services, Michel Barnier: “Today’s compromise allows us to complete the architecture of the banking union for the Eurozone”…“The Single Resolution Mechanism might not be a perfect construction but it will allow for the timely and effective resolution of a cross border bank in the eurozone thus meeting its principal objective”.

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

Security Council discusses chemical weapons use in Syria following latest global watchdog report

Progress in medical research: leading or lagging behind?

Connectivity and collaboration in the ICT industry: the key to socio-economic development

Italy should boost investment in training for the future of work

Confirmed ‘Blue Line’ tunnels ‘do not appear’ to surface in Israel – UN peacekeeping chief

Remarks by High Representative/ Vice-President Federica Mogherini at the press conference following the EU-China Strategic Dialogue

Reimagining the future for skills: What we learned from young people

2014 budget: The EU may prove unable to agree on own resources

The Changing Scope of International Economic Relations – Chinese Leadership in the 21st Century

Mergers: Commission approves acquisition of L3 Technologies by Harris Corporation, subject to conditions

Pandemic fuels culture of institutional mistrust

Military Medicine and its Relationship with Antibiotic Therapy

7 simple steps we can all take to reduce food waste

UN rights office calls on Zimbabwe Government to end ‘crackdown’ in response to fuel protests

Can Southeast Asia keep up with growing energy demand?

MWC 2016 LIVE: Mobile has power to tame transaction fees – PayPal CEO

In polarized America, a new divide looms

Thursday’s Daily Brief: Women in peacekeeping, the arrest of Sudan’s leader, updates on Libya, Nigeria and Syria

Women must be at ‘centre of peacekeeping decision-making’, UN chief tells Security Council

Governments can fight corruption by joining the digital payment revolution

What wealth managers can learn from family dynamics

The ECB accuses the politicians of inaction, continues injecting billions to banks

Ahead of key UN-backed Marrakech migration conference, youth recount harrowing journeys

Does the sharing economy truly know how to share?

Internet milestone reached, as more than 50 per cent go online: UN telecoms agency

As Houthi forces withdraw from key Yemeni ports, UN monitoring chief welcomes ‘first practical step on the ground’

Better ID card security to curb document fraud

#TwitterisblockedinTurkey and so is Erdogan

Taxation: Commission refers Germany to the Court for its failure to apply EU rules on VAT for farmers

5 times people predicted the future and got it really wrong

Afghanistan: UN ‘unequivocally condemns’ attack in Kabul

No improvement in respect for EU values: MEPs cut support for Turkey by €70m

Most leaders are missing this crucial character trait

Venezuela: European Parliament calls for additional sanctions

FEATURE: Niger’s girls find sanctuary in fistula treatment centres

The next start-up cities that will transform the global economy

MEPs demand Bulgaria’s and Romania’s swift accession to Schengen area

Closing the gap in accelerating women’s rights: the role of medical students

Strength in unity: Commission makes recommendations for the EU’s next strategic agenda 2019-2024

EU confronts environmental threats as global leaders attempt to revive the global sentiment at NYC climate week

Why do medical students seek for work abroad?

The remote doctor, can it ever work?

Cities are easy prey for cybercriminals. Here’s how they can fight back

When it comes to envirotech adoption, NGOs can lead us out of the woods

EP President praises Nobel Peace Prize award to Denis Mukwege and Nadia Murad

Mobile World Congress 2015 first to debate EU’s new stance on Net Neutrality and Roaming Charges

Investing in new energy infrastructure: Green light for EU grants worth nearly €1 billion

On the 22nd China-EU Summit: “negotiating partner, economic competitor and systemic rival”; is this the right EU approach to address your 2nd biggest trading partner?

Want more climate action? Let’s show how good a planet-friendly life can be

OECD sees global growth slowing, as Europe weakens and risks persist

More bank bailouts at taxpayers’ expenses

Database of businesses linked to Israeli settlements ‘important initial step’ towards accountability: rights expert

This is what different countries are doing to stop coronavirus from spreading

This is the ever-changing state of the world’s top cities

Humanitarian visas would reduce refugees’ death toll

Algorithmic warfare is coming. Humans must retain control

A new European Research Area: Commission sets new plan to support green and digital transition and EU recovery

European Union disenchanted with Turkey

Antitrust: Commission seeks feedback on commitments offered by Broadcom concerning TV set-top box and modem chipset markets

More Stings?

Advertising

Comments

  1. Anglian Rose says:

    Michael Barnier should be sacked, a more divisive miserable representative of the EU would be hard to find…although Junker could be a candidate..

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