ECB says EU bank resolution plans may be too complex, poorly funded

Mon Dec 16, 2013 1:55pm EST
 
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By Martin Santa

BRUSSELS (Reuters) - Europe's latest plans for winding down failing banks may be too complex and inadequately funded, the head of the European Central Bank said on Monday, as euro zone officials race to reach a deal on the thorny issue this week.

EU finance ministers want to agree on a blueprint for dealing with failing euro zone lenders before a summit in Brussels on December 19-20, to keep banking union plans on track and help restore confidence in banks after a four-year sovereign debt crisis.

But ECB President Mario Draghi questioned the strength of the plans that have emerged.

"I am concerned that decision-making may become overly complex and financing arrangements may not be adequate," he told the European Parliament.

Ministers and senior officials are set to meet daily this week to try to agree on what is called the Single Resolution Mechanism for winding down failing banks.

Deep divisions remain, especially over the Single Resolution Fund, the related joint fund that is meant to cover the remaining costs of any bank closures after shareholders, bond holders and even large depositors have been hit.

This fund is to be filled by annual bank contributions that will reach about 55 billion euros - but only after 10 years.

And while the point of banking union is to mutualise risk so that weak sovereigns are not left on their own to deal with troubled banking systems, Germany wants to minimize any liability of its banks or taxpayers for lenders elsewhere.   Continued...

 
European Central Bank (ECB) President Mario Draghi testifies before the European Parliament's Economic and Monetary Affairs Committee in Brussels December 16, 2013. REUTERS/Francois Lenoir