A messy banking union

Angela Merkel

As European finance ministers gather today to thrash out the next phase of their so-called banking union, there is a powerful and - some would say tedious - sense of "we've been here before".

Because, as usual, the seemingly intractable dispute needing to be resolved is over the extent to which eurozone governments pool their resources, in this case to help rescue the banks of a member state.

And, as ever, the German government is resisting the urgings of many of the rest to allow the mingled money of member states be deployed as a backstop when national governments and individual banks run out of funds.

You know why the Germans are resistant - they see it as Germany writing a blank cheque to underpin the recklessness and fecklessness of Italian banks and Spanish banks (and never mind that the prudential track record of German banks is hardly spotless).

Bizarrely, perhaps, George Osborne, the British chancellor, will be involved in the talks that are likely to continue into the early hours - although the UK will not participate in any common resolution fund or procedure.

Which shows the messiness of this banking union - whose most important provisions will have to be agreed by some kind of treaty that formalises UK exemption.

That said, some of what's being agreed will apply to the UK.

All member states will have a levy on their banks' assets to fund a pot of money for resolution, or bank rescues.

As it happens, the UK is the only EU member that has such a levy. And apparently it is irrelevant that its £2.9bn a year proceeds are mixed with other tax revenues and are not separated into a special bank-resolution fund.

Or to put it another way, the levy appears to be testament to the good faith of the UK Government that it will finance bank rescues (again), should that be necessary.

But if you are worried that means you - the taxpayer - will be on the hook to bail out insanely risk-taking banks before you can say "here's your Christmas bonus", here's some season comfort.

EU ministers are very close to agreeing rules stipulating that before taxpayers contribute a penny or cent to propping up a bank, the banks' most well-heeled creditors - its bondholders and those with deposits over 100,000 euros - will have to take a hit.

Apparently there is still a bit of skirmishing on this issue, with the Swedes not entirely happy.

But a pact is close. And it would apply in the UK - with the recent rehabilitation of Co-op Bank in Britain an encouraging precedent for how banks can fail and be bailed out by investors, rather than the state.

As for the wider lesson of today's complex and highly charged talks - the eurozone is a long way from being a collective of nations relaxed about making fiscal sacrifices for the common cause of saving monetary union. This means that the gift of a euro at Christmas still can't be seen as a gift that won't one day crumble.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 271.

    margaret howard

    Imn terms of detail.

    A large German bank has to set up a subsidiary in Eire as what it wanted to do would have been prevented by the German regulator. It subsequently let its Irish subsidiary go bust as what it wanted to do was financially insane!

    We really do need strong banking regulation - within the EU and indeed globally.

  • rate this

    Comment number 270.

    262 Jhanley

    "Tell this to the Irish people who have basically bailed out Germany's reckless lenders!"

    Thankfully most Irish people don't believe this rubbish and despite the harsh conditions during the bail out it has led to their recovery

    However the old adage that "No good deed remains unpunished" blames their saviours - the Germans

  • rate this

    Comment number 269.

    Cross-border pooling of bailout resources would be problematic in EZ even if levels as well as types of corruption, in govts, institutions & tax- payers, all were roughly the same, but lacking secure citizen equality of income-share, without trust in each other, in business or in govt, tax avoidance is made the preoccupation of all, evasion the work of many: we shamble toward Third World ambience

  • rate this

    Comment number 268.

    What happens when the only "industry" left in the EU is banking?

    Everything everything given to the banks on a plate.

    Pre cut and digested.

  • Comment number 267.

    All this user's posts have been removed.Why?

  • Comment number 266.

    All this user's posts have been removed.Why?

  • Comment number 265.

    All this user's posts have been removed.Why?

  • Comment number 264.

    All this user's posts have been removed.Why?

  • Comment number 263.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 262.

    The Germans want their banks to have access to the European debt markets but they don't want the risk associated with it. Tell this to the Irish people who have basically bailed out Germany's reckless lenders!

  • rate this

    Comment number 261.

    quietoaktree @260
    "not so optimistic"
    From today's polity...

    I would not dare to hope, but that others have, that all have dreams, that most of us care beyond telling for the future of our children, for the future of their children in turn at the heart of hope

    There MUST come an end to trickery & madness. Let us hope that revelation is not death-bed, from the utter wreckage of people & planet

  • rate this

    Comment number 260.

    #259 All

    --Not so optimistic --the Feudal mentality and expected responses are stubborn.

    --should not be the EU ideal nor the requested price for ´equality´ for other non-Feudal societies. from the minority of one.

  • rate this

    Comment number 259.

    "feelings of inferiority
    may be the source"

    Legends will tell, of victory for peace, all knowing the 'inferiority' of any who would deserve the contempt & concerted opposition of people & planet, Man & God, reckonings only put-off by Machiavellian divide & rule, by Murdochian plausible trickery. Equal partnership MIGHT take root under Second Coming... otherwise, if at all, by love of Life

  • rate this

    Comment number 258.

    ´Merkel visits Hollande in Paris´

    "Merkel said the EU summit beginning on Thursday would "give us the opportunity to make progress in the area of [European] banking union.""

  • rate this

    Comment number 257.

    prolerat @255
    "world socialism"

    Define, as fit for 'civilisation', comprehensible to all in simplest & most complex analysis, agreeable to all in reason & conscience, equal partnership expressing the care we would wish for all, affording the basis for rational trust in all (lost in laziness or crime), keeping 'money & markets', ditching fear & greed & corruption by ending conflict of interest

  • rate this

    Comment number 256.

    #254 All

    " ONLY with assurance for their citizens of ALL belonging in EQUAL partnership,..."

    There can be no equal partnership based on the fear of others -- encouraged by National leaders and national media.

    Superiority is suggested --but feelings of inferiority may be the source.

  • rate this

    Comment number 255.

    We can do away with the market system altogether and establish a democratic free access socialist society without needing any means of exchange. We won't need money,banks,governments,nation-state,armies navies and air-forces.Abolish the wages system,give of your labour according to your ability and take according to need. http://www.worldsocialism.org/spgb/what-socialism

  • rate this

    Comment number 254.

    quietaaktree @250
    "Failed States
    useful to no-one"

    ONLY with assurance for their citizens of ALL belonging in EQUAL partnership, will LEADERS be able to conclude a deal for the sharing of resources & the rationalisation of investment, to meet human infrastructure needs of populations everywhere (commanded by equitable demand) & strategic needs for extractive, manufacturing and financial 'centres'

  • rate this

    Comment number 253.

    249 throw

    "You can delete posts all you like Marg-----but the truth remains the truth !"

    I wouldn't demean myself asking for a post to be removed. Pity I missed it so can't reply

    What I DO want to know though is whether 244 successfully challenged my statements about US behaviour?

    Which part wasn't true? The world seems strangely unwilling to hold the mighty US to account

  • rate this

    Comment number 252.

    New Year's hope or doom?

    Still small chance of EU survival, IF exemplar of equal partnership

    Only small chance of EU implosion faster than of others. From current trajectory (corruption dictated word-wide), highest probability of global 'victory' for most ruthless in fear & greed, survivors of this betrayal of humanity turning to equal partnership for viability. Civilisation in an Earth degraded


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