30th Jun 2022

EU in new bid to broker bank closure deal

  • Eurozone finance ministers will be back in Brussels on Tuesday to broker a deal (Photo: Leonid Mamchenkov)

EU officials have a new proposal on the table as they try to agree on rules to wind up ailing banks this week.

Eurozone finance ministers will meet in Brussels on Tuesday (17 December) to discuss the fresh compromise, which was prepared by the Lithuanian government in its role as the EU's current presidency.

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

Under the text, the costs of closing down a bank in the first year after the deal would be fully covered by a fund set up by the country where the bank resides.

All the national funds for closing down banks would be merged into a single resolution fund for the eurozone after 10 years.

The Lithuanian proposal would also require a new intergovernmental treaty to be drafted and agreed in spring 2014, to allow national resolution funds to access one another's resources in the interim nine years.

The idea, which was engineered by German finance minister Wolfgang Schaueble, risks prompting a fight with the European Parliament, however.

MEPs have already made clear they would not agree to a regime that shuts them out of the decision-making process.

Under the original proposal tabled by the European Commission, governments will be required to set up national resolution funds to cover the costs of bank failure. The national funds would then be pooled into a single fund.

The national funds would be composed from annual bank levies, which would be worth 0.1 percent of the total amount of deposits in a country's banks.

The final single fund would be worth around €60 billion.

The commission proposal has raised concerns about how to cover the costs of a bank failure if the size of the resolution fund is insufficient, however.

Meanwhile, the German government has baulked at the prospect of a single resolution fund, fearing that, as the bloc's biggest member state, its taxpayers would be made liable for the lion's share of all debts of all banks in the eurozone.

But an intergovernmental treaty, using a similar procedure to the one used to create the eurozone's bailout fund, the European Stability Mechanism (ESM), would give it special safeguards.

Ministers are under pressure to agree their negotiating position before the end of the year, with a view to a final deal with MEPs before next May's European elections.

For their part, deputies on the parliament's economic affairs committee want to set up the ESM as a potential credit line for the resolution funds.

They want decisions on whether to take a bank into resolution to be taken by the board of the Single Resolution Authority, a new EU body, which is to be composed of representatives of eurozone countries and the EU institutions.

EU ministers clinch deal on failed banks

EU ministers have agreed new rules on how to wind up failed banks - the key pillar of a "banking union" designed to stop a repeat of the crisis.

MEPs boycott awards over controversial sponsorship

Two MEPs have withdrawn their nominations from the MEPs Awards over the Swiss pharmaceutical company Novartis's participation as a sponsor — currently involved in an alleged bribery scandal in Greece.

EU Parliament interpreters stage strike

Interpreters at the European Parliament are fed up with remote interpretation, citing auditory health issues given the poor quality of the online sessions.

News in Brief

  1. EU announces trade deal with New Zealand
  2. Russia threatens Norway over goods transit
  3. Russia urges Nato not to build bases in Sweden, Finland
  4. New president for European Committee of the Regions
  5. Gas flows from Spain to Morocco, after Western Sahara row
  6. BioNTech, Pfizer test 'universal' coronavirus vaccine
  7. UK sanctions second-richest Russian businessman
  8. Hungary permits emergency supervision of energy firms

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  2. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  3. Council of the EUEU: new rules on corporate sustainability reporting
  4. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  5. Reuters InstituteDigital News Report 2022
  6. EFBWW – EFBH – FETBBHow price increases affect construction workers

Latest News

  1. Israel smeared Palestinian activists, EU admits
  2. MEPs boycott awards over controversial sponsorship
  3. If Russia collapses — which states will break away?
  4. EU Parliament interpreters stage strike
  5. EU's post-Covid billions flowing into black hole
  6. Nato expands and reinforces on Russian flank
  7. EU Commission says it cannot find messages with Pfizer CEO
  8. EU ministers sign off on climate laws amid German infighting

Join EUobserver

Support quality EU news

Join us