Sunday

2nd Apr 2023

Germany budging on banking union

  • ECB chief Draghi and Germany's Merkel will discuss the upcoming banking union at the EU summit (Photo: consilium.europa.eu)

After having opposed for months a so-called resolution mechanism for failing eurozone banks, Germany is budging on the issue and wants a deal by the end of the year.

The European Commission proposal for an authority having the power to tell banks to shut down or to draw money from shareholders, creditors and ultimately taxpayers had been flatly rejected by the German government earlier this year.

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

But at an EU summit on Thursday-Friday (24-25 October) in Brussels, Chancellor Angela Merkel is set to have a "constructive" stance on the matter and seek a deal among member states by the end of the year, a senior German official said on the eve of the meeting.

The German chancellery and the finance ministry are already "working on solutions" on the most controversial points of the proposal, the official said.

Under a possible compromise, the Single Resolution Mechanism (SRM) would only extend over the 130 largest banks in the eurozone and national parliaments would have to approve any use of public money in helping out troubled banks - a constitutional requirement in Germany.

Also key to German approval is a clear pecking order of shareholders and creditors who have to step in when a bank is wound down.

"The commission has proposed a fund to be set up from the banks' own contributions, but it will take 10-15 years until it will be available, the official said.

This means that in the next 3-5 years we will not have a sufficiently funded pot. Instead, we will have again and again the question of using public money. And the European Commission has not included an answer to this question in its proposal."

Limiting the SRM to the 130 largest banks would be the preferred German option because it would create a "certain symmetry" to the single banking supervisor being currently set up within the European Central Bank (ECB), whose remit is also on these big banks only.

On Wednesday, the ECB published its plan on how it will assess the balance sheets of these banks - a precondition for it to take on the supervisory role.

Key to this exercise is for banks to have eight percent capital - a higher-than expected requirement.

If capital shortfalls are identified, banks will be required to make up for them, the ECB said. Draghi has said a "public backstop" must also be available for this exercise.

A provisional list of banks to be reviewed includes 24 German lenders - including six of the Landesbanken that were bailed out in 2008. French, Italian, Dutch, Spanish, Irish, Portuguese, Cypriot and Greek banks are also on the list.

Shares in eurozone banks fell by 2.5 percent on Wednesday, reflecting investors' concerns that these tests will pressure banks to tighten their lending. Spain's Bankia falling by five percent on the markets and Germany's Commerzbank by three percent.

The German financial supervisor Bafin said the country's banks were "already intensively preparing for the comprehensive assessment."

US spying to trump economy at EU summit

A meeting of EU leaders is likely to be diverted from its official agenda - innovation and eurozone integration - as the US spying scandal flares up in France and Germany.

Police violence in rural French water demos sparks protests

Protests are planned in 90 villages across France on Thursday to protest against escalating police violence that have left 200 people injured, including two people who are still in a coma, after a violent clash in Sainte-Soline over 'water privatisation'.

EU approves 2035 phaseout of polluting cars and vans

The agreement will ban the sale of carbon-emitting cars after 2035. The EU Commission will present a proposal for e-fuels after pressure from German negotiators via a delegated act, which can still be rejected by the EU Parliament.

Opinion

Dear EU, the science is clear: burning wood for energy is bad

The EU and the bioenergy industry claim trees cut for energy will regrow, eventually removing extra CO2 from the atmosphere. But regrowth is not certain, and takes time, decades or longer. In the meantime, burning wood makes climate change worse.

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. EU to press South Korea on arming Ukraine
  2. Aid agencies clam up in Congo sex-for-work scandal
  3. Ukraine — what's been destroyed so far, and who pays?
  4. EU sending anti-coup mission to Moldova in May
  5. Firms will have to reveal and close gender pay-gap
  6. Why do 83% of Albanians want to leave Albania?
  7. Police violence in rural French water demos sparks protests
  8. Work insecurity: the high cost of ultra-fast grocery deliveries

Stakeholders' Highlights

  1. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains
  2. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  3. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  4. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  5. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  6. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence

Join EUobserver

Support quality EU news

Join us