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Baby steps to EU bank union come too late for crisis By John O'Donnell Posted 2012/06/05 at 7:26 am EDT BRUSSELS, June 5, 2012 (Reuters) — The European Commission will propose far-reaching powers forregulators to deal with failing banks on Wednesday, a step towardsthe banking union the European Central Bank has demanded to securethe euro's future. But the proposal, which suggests closer coordination betweencountries and increased powers to force losses onto bondholders, isunlikely to take effect before 2014, too late for Spain, whichcould be forced to seek a Greek-style bailout if it cannotrefinance its indebted lenders. Even over the medium term there are many hurdles to the bankingunion championed by ECB President Mario Draghi - a three-pillarplan for central monitoring of banks, a fund to wind-down biglenders and a pan-European deposit guarantee. Germany has balked at signing up to a single European scheme thatcould see it shoulder the costs of a bank collapse in anothercountry, and Britain fiercely resists any attempt by Brussels toimpose EU controls over financial services, which account foralmost a tenth of its economy. "Everybody's energy right now should be focused on the currentcrisis," said Nicolas Veron of Brussels think tank Bruegel. "I'mnot sure we can afford the luxury of thinking about a permanentframework when the houses are burning." Daniel Gros of the Centre for European Policy Studies think tanksaid while it was in everyone's interest to prevent a repeat of thechaos that followed the collapse of U.S. investment bank LehmanBrothers, action was needed now. "We need immediate decisions", he said. "We have a crisis on ourhands." The Commission's 156-page draft legislation, seen by Reuters, willsuggest giving supervisors powers to "bail in" or force losses ontobondholders of a failing bank so that taxpayers are kept off thehook, and forge closer links between national back-up funds to windup cross-border lenders. The European Commission hopes that tighter links between individualwind-down schemes across the European Union will pave the way for asingle resolution fund to close or salvage parts of a flaggingbank, a key element of Draghi's vision. MORE URGENT NEEDS The law would introduce what some officials describe as aninsolvency regime for banks in the European Union. It would also instruct countries to prepare for a bank collapse,collecting money through an annual levy on banks that would be usedin an emergency to provide loans or guarantees. But the impasse between the European Parliament and EU memberstates in negotiating a separate framework proposed by theCommission in 2010 for deposit guarantee schemes illustrates theobstacles to the creation of a wider banking union. Peter Simon, a German lawmaker who led negotiations on behalf ofthe parliament with countries to broker compromise on the draftlaw, criticized EU states for wanting to cut the amount of fundskept to cover any sudden cash call by savers. "France, Italy, Britain and Germany were not in favor of creatingnational funds big enough even to deal with a medium-sized crash,"he said. "We suggested that such funds have the equivalent of 1.5 percent ofcovered deposits and they wanted 0.5 percent. This kind ofprotection against future bank crises would be fake. It wouldn'teven be enough to solve a crisis at a midget bank." Simon is also skeptical about the prospects of creating apan-European fund to wind down banks. "There was little appetite to create pan-European funds," he said."There would be mistrust among states in pursuing suchcooperation." Berlin is not in a hurry. A government paper seen by Reuters saidGermany does not expect Europe to take any final decisions onstrengthening economic policy coordination between member statesuntil the spring of next year. More radical immediate moves, such as the idea of allowing the eurozone's permanent rescue scheme, the 500 billion euro ($625 billion)European Stability Mechanism, to invest directly in banks seem adistant prospect. The Centre for European Policy Studies' Gros said only anacceleration of the crisis would prompt German Chancellor AngelaMerkel into faster action. "If it is a slow grind, where the German economy is not visiblyaffected, it will be hard for her to do that. It has to be sourgent that there is an emergency summit of leaders and that shereturns home and says: 'there was no choice'." (editing by Elizabeth Piper). I am an expert from tackle-fishing.com, while we provides the quality product, such as Fishing Tackle Set , Fishing Tackle Accessories, Fishing Tackle Bag,and more.
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