Wednesday

11th Dec 2019

Eurozone bank fund needs credit line, Draghi says

A eurozone bank resolution fund should have its own credit line allowing it to cover the costs of bank failure, European Central Bank (ECB) chief Mario Draghi said Monday.

Speaking on Monday (23 September) at a hearing of the European Parliament's Economic committee, Draghi told MEPs that although national authorities will still be responsible for bearing the costs of bank resolution in the short-term, a permanent fund would need a "backstop."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

The ECB will be conducting stress-tests of banks across the eurozone in the coming months, as it prepares to become the bloc’s single bank supervisor next year.

“We’ll have to have national backstops in place,” said Draghi, adding that “the role for the national backstops is there and it’s realistic.”

Draghi, who is a supporter of the plan, played down suggestions that the ESM, the eurozone's €500 billion bailout fund, could be a source of funding.

“I am not sure that this is possible within the existing treaty,” he said.

EU financial services commissioner, Michel Barnier, unveiled his proposal for an singe resolution mechanism (SRM) in July.

The commission proposal would create a single system for the winding-up of failing banks and a common eurozone fund to cover the costs. However, Barnier's plan would see the SRM start in January 2015, with the resolution fund being gradually built up over 10 years through a levy on banks worth around 1 percent of deposits, leading critics to comment that a lack of money would reduce the fund to a "paper tiger."

Senior MEPs are also expected to include provisions for a backstop in a draft report expected to be published later this week. Other options could include using the EU budget as collateral.

Negotiations on a single resolution mechanism for the eurozone, the second key part of a banking union, have stalled since the summer, in large part because of the German elections.

Wolfgang Schaueble, Germany's finance minister, is a staunch critic of the plan, but seems unlikely to retain his position in a new coalition government.

The timeline is also tight as policy makers edge closer to next May's European elections.

MEPs on the economic affairs committee are set to adopt their position on the text in November in a bid to maintain the pressure on ministers.

Analysis

When banks need a backstop

In Brussels this week talks have returned to the familiar theme of banks, bailouts and backstops.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Interview

EU Africa envoy: Europe needs to look beyond migration

Europe's obsession with migration from Africa means it risks losing out the continent's potential when it comes to trade, says the EU's ambassador to the African Union, Ranier Sabatucci. "Africa is a growing continent, it is the future," he says.

EU agrees 2020 budget deal

EU governments and the parliament agreed in marathon talks ino next year's budget - which will boost spending on climate, border protection, and the European satellite system. It will also be a benchmark if there is no long-term budget deal.

News in Brief

  1. Czechs protest against PM Babis over EU subsidy 'fraud'
  2. EU disbursed €2.7bn for Turkey refugees
  3. UK ports set to host EU border checks for Northern Ireland
  4. EU puts tech giants in crosshairs
  5. Faroe Islands under pressure to chose Huawei
  6. Hungary asked to apologise after council leak
  7. MEPs: Finnish budget proposal 'impossible to implement'
  8. EP committee supports 'Future of EU Conference'

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Join EUobserver

Support quality EU news

Join us