Tuesday, April 15 14:09:38
The European Parliament today approved the last elements of a new regulatory system meant to prevent failing banks from ever again driving EU member states into bankruptcy.
With 'banking union' passed by a very large majority, "we now have in place a true European system to supervise the eurozone banks and deal with any future failures," EU Financial Markets Commissioner Michel Barnier said.
The new laws, which some critics say does not go far enough to protect taxpayers, include a law confirming a guarantee on deposits up to E100,000.
Another law, a bank recovery and resolution directive, gives the 28 states in the union a common rule book for handling failing banks. That law would also oblige creditors to take extensive losses before state funds are used.
The other main law voted on today, a regulation for a single-resolution mechanism, establishes a board to ensure that the owners and creditors of major lenders in the euro zone pay first in cases of failure. That regulation would also establish a common fund of E55 billion, to be built up over eight years, financed by all euro zone banks to help cover the costs of closings.
The three laws, which are key pillars of what European Union officials have called a banking union, are subject to the final approval of the bloc's Council of Ministers. But the approval is expected as a formality, as representatives from European Union governments have already given their consent.
"We are finally doing it now," Hannes Swoboda, the president of the Socialists and Democrats group in the European Parliament, said at a news conference Tuesday. "Late, but we are doing it."
Mr. Swoboda said the laws should have been put in place more than a decade ago, when the euro went into circulation.
Back in Ireland, the Irish Banking Federation welcomed today's vote by the European Parliament to approve the Single Resolution Mechanism (SRM), the second pillar of European Banking Union.
The new legislation will provide for improved clarity and efficiency for the decisions to be made under the new mechanism that determines whether Eurozone banks need to be placed into resolution, it said.
The creation of the SRM - with a central decision-making board and a single resolution fund of E55 billion - will ensure that resolution decisions across participating member states will be taken in a coordinated and effective manner. It should also help to minimise negative impacts on financial stability and break the link between banks and sovereigns thereby protecting taxpayers' money in the future.
Commenting on today's vote, IBF Chief Executive, Noel Brett said: "Today's vote by the European Parliament is a significant step which paves the way for a fully operational Banking Union. IBF welcomes the autonomy of the Single Resolution Board to make clear decisions on how best to resolve failing banks which will ultimately minimise the impact of a bank failure and avoid the need for taxpayer support."
"There are however some key elements of the mechanism which have yet to be clarified. Details of how the E55 billion resolution fund will be financed will not be outlined until later this summer and IBF will be monitoring this closely to assess how this will impact on banks in Ireland."