Friday

17th Nov 2017

Analysis

The battle for banking union

  • AIB - the bailed-out Irish bank - under a European banking supervisor, would its problems have been spotted earlier? (Photo: Matt Buck)

In their last meeting before the summer break, EU leaders spoke about the need to break the "vicious link" between banks and sovereigns. The kind that allowed lenders to take unnecessary risks while local politicians conveniently looked the other way.

Now, just one week before a legislative proposal is to be tabled, the "vicious link" is in danger of being allowed to stay. And if it does, it will be down to significant lobbying by German Landesbanken and Sparkassen. In other words, the system will have lobbied to keep the system.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

At stake is whether a single banking supervisor should oversee all 6,000 euro-area banks.

Berlin wants only big banks to be directly monitored. The rest, as finance minister Wolfgang Schaeuble recently wrote in the Financial Times, are to be treated differently.

The European Commission has said it will work out a compromise with Germany.

But in doing so it risks completely stripping the proposal of any of its usefulness.

It is not large banks, such as Deutsche Bank, where scrutiny is a problem, but much rather their smaller regional cousins.

Key issues that that will have to be dealt with in the banking proposal include how often banks are checked. Will it be on a weekly or monthly basis? Will the European Central Bank - the likely supervisor - give explicit orders or just make suggestions? Will Frankfurt will able to close down a bank? If so, in what circumstances and who will foot the bill?

At Germany's insistence, what is likely to emerge next week is a half-baked solution. There will be a European supervisor. But the national supervisors will ultimately hold sway.

This will essentially mean that no interfering and no much-needed light will be shined on Sparkassen or on any other small or medium bank in the eurozone. They will continue to operate under the scrutiny radar.

If this is the case, it will be go down as yet another of the eurozone's sticking plaster solutions.

More broadly, it will undermine Germany's case for closer political integration - ultimately involving treaty change - in the EU.

Berlin has been arguing to its somewhat mutinous euro partners that more scrutiny powers, particularly over national spending, need to be given to Brussels.

This, it says, would give confidence to the markets and prevent such a eurozone crisis from occurring again. Much the same case could be made for a European banking supervisor with bite.

Banking union to put 6,000 banks under ECB supervision

The European Central Bank will have the "ultimate decision-making authority" on supervising 6,000 euro-area banks, a commission spokesman has said. But Germany would like fewer banks included in the new system.

ECB to become bank union supremo

The ECB will supervise Europe’s biggest banks from mid-2013, according to controversial banking union proposals to be announced Wednesday.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

Stakeholders' Highlights

  1. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  2. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  3. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  4. Mission of China to the EUNew era for China brings new opportunities to all
  5. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  6. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education
  7. Nordic Council of MinistersNordic Council Calls for Closer Co-Operation on Foreign Policy
  8. Swedish EnterprisesTrilogue Negotiations - Striking the Balance Between Transparency and Efficiency
  9. Access EuropeProspects for US-EU Relations Under the Trump Administration - 28 November 2017
  10. World Vision20 November: Exchange of Views at the EP on Children Affected by the Syria Crisis
  11. Nordic Council of MinistersSustainable Growth the Nordic Way: Climate Solutions for a Sustainable Future
  12. EU2017EEHow Data Fuels Estonia's Economy

Latest News

  1. EU leaders make pledge on social issues after populist backlash
  2. EU agencies and eastern neighbours This WEEK
  3. Germany slams Dutch call for more ambitious EU climate goal
  4. Mind the gap: inequality in our cities
  5. Climate activists 'disappointed' with EU at climate talks
  6. Davis outlines UK vision on Brexit in Berlin
  7. German coalition talks in near collapse
  8. EU to proclaim 'pillar' of social rights in Gothenburg