While many of the European Union’s 27 countries support the European Central Bank’s proposed banking union, Germany and Great Britain have had reservations. But as Reuters reported on Wednesday, Germany has indicated that it is ready to back the ECB as the chief supervisor of banks, which is an important step towards implementing the policy as all members of the EU must approve the union for the project to progress.
“We hope for major progress and perhaps a breakthrough (in the talks),” a German official told the publication anonymously. “We have some questions but if they can be resolved by finance ministers today then Germany will not stand in the way of an agreement.” He also added that Finance Minister Wolfgang Schaeuble informed the German cabinet that he was “optimistic” about the deal before EU finance ministers met in Brussels on Wednesday.
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According to Reuters, a banking union would put an end to the “piecemeal crisis-fighting measures” that the ECB has used over the last three years by laying a “cornerstone for deeper economic and fiscal reforms.” Furthermore, it would be the first joint attempt by the euro zone to develop a unifying policy to deal with problem banks. EU leaders are counting on the single banking authority to establish a resolution fund that will prevent banks from dragging member states into crisis in the future.
Finance ministers from all member states must still settle how many banks the ECB should directly supervise, but Germany has more pressing concerns. The country’s leaders are worried that once a plan is set to handle failed banks, Germany will be left to bear the brunt of the cost. It has also brought attention to the potential conflict of interest that could arise between the ECB’s role as a banking supervisor and its role in determining monetary policy…
Britain, with its large and influential banking sector, has found fault with the plan as well. It fears that the euro-zone states would vote as a bloc to pass rules in their favor. To earn its support of the banking union, the EU Committee of Britain’s upper house of parliament stated in a report that certain safeguards, including a different system of voting, would have to be adopted to protect its banking sector. London has asked that countries outside the single currency be allowed to jointly block certain decisions made by the ECB. However, the euro zone is opposed.
Sweden holds a similar position to Great Britain. Finance Minister Anders Borg has said that the country is unlikely to join the union, but may back the plan if pan-EU voting safeguards are implemented.
While the views of the European Union’s member states are varied, Cyprus, the current holder of the rotating EU presidency, has prepared a compromise proposal. According to the document, seen by Reuters, it recommended that “banks with assets of 30 billion euros or with assets larger than one fifth of their country’s economic output be supervised directly by the ECB rather than national supervisors.” Banks with subsidiaries in at least two other states in the banking union would also be included.
While all 27 EU states must vote in favor of the plan, only countries in the euro zone will fall under the banking union in the beginning.