Eurozone Reaches Banking Union Agreement
Finance ministers from the Eurozone have agreed on a long-awaited pact on rescuing failing banks in the single currency area.
The agreement aims to create a EUR 55 B fund, financed by the banking industry, over the next 10 years, reports the BBC.
The fund would be backed by a new agency, which will decide on how to deal with failing banks. The deal is part of wider efforts by the region's economies towards building a banking union as they look to avoid taxpayer-funded bank bailouts.
Wolfgang Schaeuble, Germany's Minister of Finance, said that by agreeing the deal the eurozone ha "created the banking union's final legal pillar".
The proposed banking union consists of three parts or three pillars
The first is a common banking supervisor - the European Central Bank (ECB), which will be given the power to monitor the health of, and the risks taken, by all the major banks within the eurozone.
According to an EU proposal, the ECB will "have direct oversight of eurozone banks, although in a differentiated way and in close co-operation with national supervisory authorities". It will also intervene if any of the banks gets into trouble.
The second part is the Single Resolution Mechanism. This means that if a bank anywhere in the eurozone gets into trouble, the process of bailing it out - or even letting it go bust - would be managed by a common "resolution authority".
The final pillar of the proposed union involves a common deposit guarantee, which means that anyone with an ordinary bank account anywhere in the eurozone would have their money - up to a limit of EUR 0.1 - guaranteed by a common eurozone fund.
The 17-nation eurozone is moving to strengthen its banking sector by introducing common rules and protections. The move has come after the recent crisis forced a number of European governments to spend large sums of money supporting banks whose lending had turned bad.
Over the main years of the crisis, European governments spent EUR 1.5 T propping up the banks. The idea of a banking union is to make huge taxpayer-funded bank bailouts a thing of the past. "If we continue... on the path toward banking union then we will be able to continue the stabilization of the European currency as the basis for a return to stable growth in Europe," said Mr Schaeuble.
- » Bulgaria to Host 2015 IMF, World Bank Meeting
- » Bulgarian Finance Minister Meets IMF Representatives in Washington
- » Bulgaria's Municipalities to Get EUR 630 M Under EU Program
- » Greece Launches EUR 3 B Bond Emission on Markets
- » Romanian Senate Agrees on EUR 100 M Aid to Moldova
- » Bulgaria's Lawmakers Adopt Consumer Credit Act Amendments