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”.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

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

Strengthen inclusion, participation of people with autism to ‘achieve their full potential’ says UN chief

Microsoft says the internet is getting a little nicer

EU food watchdog: more transparency, better risk prevention

More state aid to big firms, no special provisions for the SMEs

UN experts report: Business ‘dragging its feet’ on human rights worldwide

Global ageing is a challenge – and an opportunity

EFSF/ESM boss tells half truths about Troika’s doings

Nearly two-thirds of children lack access to welfare safety net, risking ‘vicious cycle of poverty’

New rules for temporary border controls within the Schengen area

How ducks are helping Bangladeshi farmers cope with cyclones

We must build resilience to face the future – but will we be fast enough?

Anti-vaccers: does the empty can rattle the most?

Eurogroup asked to reduce public debts of its member states

MEPs want robust EU cyber defence and closer ties with NATO

Harnessing the power of nature in the fight against climate change

World ‘not yet on track’ to ensure children a better future: UN rights chief

The sun’s impact on Earth and weather celebrated, as planet marks World Meteorological Day

Indonesian tsunami death toll climbs over 400 as Government-led relief efforts are stepped up

Better Regulation principles: at the heart of the EU’s decision-making process

UN investigates systematic sexual violence across South Sudan

Climate change is speeding up. Our response needs to be even faster

Horse meat runs faster than authorities…

Nigeria: Top UN officials say more support needed to ease humanitarian crisis and rebuild lives in conflict-ravaged north-east

Radioactive nuclear waste is a global threat. These scientists may have a new solution

Blockchain can change the face of renewable energy in Africa. Here’s how

The financial future of Eurozone on the agenda of Friday’s ECOFIN council

Why the 33,000 staff European Commission did not have a real contingency plan for the refugee crisis?

EU Commission spends billions without achieving targets

Youth for Climate Change

COP21 Breaking News_05 December: Ban Ki-Moon Closing Address at COP21 Action Day Innovation, Imagination, Faster Climate Action

Eurozone: New data show recession and debt closer to explosion

First Western Sahara talks at UN in six years, begin in Geneva

A Europe that Protects: Commission calls for continued action to eradicate trafficking in human beings

Presidents of pan-European youth organisations call upon the European Council to preserve the Schengen principles

Out with the old: Young People transforming Humanitarian Action

Security Council hails ‘historic and significant’ joint peace declaration by Ethiopia and Eritrea

Environment Committee MEPs push for cleaner trucks and electric buses

7 key challenges for the future of ASEAN – and how to solve them

WHO and IFMSA as transcendent pillars for world improvement

“A divided Europe is not in China’s interests”, Ambassador Zhang of the Chinese Mission to EU welcomes Brussels

“Leaked” TTIP document breaks post 8th negotiations round silence and opens door to critics

Britain’s May won the first round on the Brexit agreement with the EU

Commission makes it easier for citizens to access health data securely across borders

Tsipras bewildered with Berlin’s humiliating demands; ECB expects political sign to refinance the Greek banks

More than 750 million people around the world would migrate if they could

Fighting cybercrime – what happens to the law when the law cannot be enforced?

The inhumane face of crisis mirrored in numbers

Long live Eurozone’s bank supervisor down with the EU budget supremo

‘Critical test’ for North Korea’s Government as civilian suffering remains rife, warns UN rights expert

Following the World Cup? Then you’re watching high-performing migrants at work

How telehealth can get healthcare to more people

The secret weapon in the fight for sustainability? The humble barcode

Cyclone Idai: emergency getting ‘bigger by the hour’, warns UN food agency

European Youth Forum and youngest MEPs call on President Juncker to keep his promise to Europe’s youth

Falsified medicines: new rules to enhance patients’ safety

UK’s Cameron takes the field to speed up TTIP talks. Will “rocket boosters” work?

Trailing the US-EU economic confrontation

Logo Mania: A call to action to our crisis of connection

Banks, insurance giants are free again to abuse the real economy

Who will win the AI race? If countries work together, then the answer could be all of us

More Stings?

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