Wednesday

22nd Sep 2021

UK minister furious at EU bank talks

  • Osborne (c) said he could not agree to a deal that would make him 'look like an idiot' (Photo: consilium.europa.eu)

An acrimonious 16-hour long meeting on stricter bank rules ended with a promise to clinch a final deal on 15 May, with Britain's George Osborne at one point saying the envisaged agreement would make him "look like an idiot."

"We discussed a huge number of things, from 10am when the meeting began until now, two in the night. We can say we have an agreement, it needs technical work until it's completely done - by 15 May," Danish economy minister Margrethe Vestager, who chaired the meeting, said at a press conference early on Thursday morning (3 May).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The 700-page long text will still have to be negotiated with the European Parliament before coming into force as envisaged on 1 January 2013. Its main objective is to raise banks' capital reserves from two to seven percent, in line with global rules agreed after the collapse of Lehman Brothers in 2008 and massive bail-outs for banks in the US and Europe.

Britain, Sweden, Poland and a few other countries did not object to the mandatory figures, but they want to have the possibility that national authorities will impose even stricter requirements of up to 12 percent, without having to ask for permission from the EU commission.

Germany, France, the EU commission and the European Banking Authority warned the plan will distort the internal market and force British or Swedish subsidiaries, for instance, to reduce lending to eastern European economies.

Britain's Osborne was staunchly opposed to a Danish compromise allowing a "flexibility" of up to three percent on top of the seven imposed by the new rules. In publicly televised debates, the British minister said he was "not prepared to say something that is going to make me look like an idiot five minutes later."

Sweden's Anders Borg said that while he supports Swedish bank lending in Baltic states, he also "asks for understanding from these countries" if Stockholm insists for higher capital requirements so as to avoid the taxpayer having to foot more bail-outs.

"Either we have strong banks or the taxpayers take the risk, and I prefer to have strong capital in the banks than to take risks with the taxpayers," Borg argued.

After having warned it would be "disastrous" if no deal was reached on Thursday, Germany's Wolfgang Schauble left the meeting shortly before midnight, explaining to reporters he was confident the outstanding issues could be ironed out by 15 May.

As for the British opposition, Schauble joked saying he would seek "revenge for having taken so long today" during a football match on 19 May in Munich between Germany's Bayern Munchen and Britain's Chelsea clubs.

On the practical side, ministers were left to eat sandwiches instead of a proper lunch or dinner because the meeting was supposed to have ended by 2pm local time.

If Britain agrees to cap its extra-requirements at three percent, the division still showcases "the conflict between continental versus capital-markets dominated economies," Diego Valiante from the Centre for European Policy Studies, a Brussels-based think tank, said.

Valiante noted that even with higher capital buffers, the financial sector in Europe will not be safer unless badly-performing "zombie banks" are restructured and capital markets start lending to smaller and medium-sized enterprises, reducing the reliance on banks.

New rules may hit eastern Europe, banker warns

New EU rules currently being worked on to make banks take less risks and hold more capital may have "unintended consequences" on the eastern European economies, where companies are more reliant on bank loans than in the West.

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  2. Nordic Council of MinistersCan you love whoever you want in care homes?
  3. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  4. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals
  5. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  6. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed

Latest News

  1. First refugee deaths confirmed on Belarus-EU border
  2. EU kept in dark on ex-commissioner's new lobby job
  3. Fraud against EU dropped 20% last year
  4. French outrage over US security deal exposes EU frustrations
  5. Auditors slam EU Commission on green investments
  6. Youth migration 'costing West Balkans up to €5.5bn a year'
  7. Central & Eastern Europe: What Merkel did for us
  8. Netherlands against more rights for rejected asylum-seekers

Join EUobserver

Support quality EU news

Join us