Wednesday

1st Apr 2020

Draghi sceptical on German bank union plan

  • Draghi: 'We can't have hundreds of people debating whether a bank is viable or not' (Photo: consilium.europa.eu)

European Central Bank (ECB) boss Mario Draghi has given a sceptical reaction to a German-led compromise on banking union, saying that it could create a regime "that is single in name only."

Speaking at a hearing with the European Parliament's economic affairs committee on Monday (16 December), Draghi urged deputies to agree "a strong and credible resolution mechanism" with ministers.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

The new rule-book should have "a single system, a single authority and a single fund," said Draghi, adding that he was "concerned that the decision making procedures may become overly complex".

"Everybody knows that these decisions must be taken instantly…we can't have hundreds of people debating whether a bank is viable or not," he told MEPs.

EU finance ministers will gather in Brussels this week in a bid to thrash out an agreement on a common resolution mechanism to wind up insolvent banks.

Governments will be required to set up bank-funded national resolution funds over a period of ten years to cover the costs of bank failure, which will eventually be worth around €60 billion. But it is unclear what should happen if a bank failure cannot be covered by the resolution fund.

Berlin has consistently voiced its opposition to the prospect of a single resolution fund, fearing that as the bloc's biggest member state, its taxpayers could be made liable for the debts of all banks across the eurozone.

The latest compromise prepared by the Lithuanian EU presidency would set up an inter-governmental treaty to govern whether countries could have access to each other's funds during the first ten years of the regime.

It would also establish a single resolution board composed of national and EU officials charged with deciding on whether to take a bank into resolution.

For their part, MEPs on the committee will adopt their own negotiating position on the resolution mechanism drafted by Portuguese centre-left deputy Elisa Ferreira on Tuesday (17 December).

Deputies have already signalled their opposition to a treaty which would cut them out of the decision-making process. They are also expected to call for a single fund with a credit line from the eurozone's bailout fund, the European Stability Mechanism (ESM).

The ECB chief said that agreement on the resolution regime was "essential for market perception". He added that the ESM should be used to provide direct recapitalization to banks if needed, also an idea strongly resisted by Germany.

Defending the ECB

Meanwhile, following questions from German deputies, a combative Draghi defended the ECB's Outright Monetary Transactions (OMT) instrument which gives it the ability to buy up potentially unlimited supplies of eurozone government bonds.

Although the Frankfurt-based bank has not yet used the scheme to purchase bonds, it has been the subject of a legal challenge from the German Bundesbank which argues that it goes beyond the bank's mandate of controlling price stability.

"We run monetary policy for the whole of the eurozone," he said, adding that "OMT has been welcomed world-wide as a success."

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.

EU reaches deal to protect bank savings

EU lawmakers have agreed the first €100,000 of savings per depositor and per bank will be guaranteed if the bank gets into difficulty.

News in Brief

  1. Danish conservatives want Orban party kicked out of EPP
  2. Dutch finance minister repents on virus help
  3. France to house domestic violence victims in hotels
  4. Europe sends medical goods to Iran, despite US embargo
  5. Commission sets consultation on raising 2030 climate target
  6. 12-year old Belgian girl dies of coronavirus
  7. EU commission: no 'indefinite' emergency measures
  8. Denmark plans 'gradual' return to normal after Easter

Column

Trying to think straight about coronavirus

Clear-headed thinking becomes nearly impossible under this relentless barrage of bad news and apocalyptic analysis, Ferraris writes - a state of mind he describes as "cogito interruptus".

Coronavirus

EU states urged to share sick patients

EU states should take in sick people from Italy and Spain in a show of solidarity amid foreign propaganda attacks, MEPs have said.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. EU cancels April Fool's 'fake news'
  2. A coronavirus 'Marshall Plan' alone won't be nearly enough
  3. Trying to think straight about coronavirus
  4. Berlin ready to airlift Greek island refugees
  5. Von der Leyen criticises Hungary, but fails to mention it
  6. Air pollution drops in Europe, but how long will last?
  7. Human rights abusers don't stop for virus, MEPs tell EU
  8. EU states urged to share sick patients

Join EUobserver

Support quality EU news

Join us