Saturday

21st Jan 2017

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).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey