Monday

25th Sep 2017

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.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  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.

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.

May seeks EU grace period

Eagerly awaited Brexit speech was short on details, but May pledged to honour financial commitments while calling for a two-year transition deal after the UK left.

Analysis

Merkel-Macron: An EU motor in the making

Merkel's re-election is expected to revive the Franco-German EU motor, but the German leader and France's new ruler are still searching for a common vision.

News in Brief

  1. Merkel wins fourth term, exit polls say
  2. EU to hail 'aspirations' of former Soviet states
  3. UK says credit downgrade was wrong
  4. Dutch state appeals ban on taking air-polluting measures
  5. May proposes 2-year transition period after Brexit
  6. May to call on EU's 'sense of responsibility'
  7. Catalonia has 'contingency plans' for independence vote
  8. Last German polls confirm Merkel's lead

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel