Europe moves to banking union with blueprint for failing lenders
By John O'Donnell and Martin Santa
BRUSSELS (Reuters) - The European Union agreed on Thursday a blueprint to close failing banks but stopped short of a more ambitious plan for the euro zone to unite in tackling its troubled lenders.
More than five years since a financial crisis struck, Europe is on the verge of finalizing one its most ambitious reforms since the launch of the euro - an agency and fund to shut problem banks as soon as the European Central Bank starts to police them next year.
Early on Thursday morning, finance ministers from across the bloc sealed a broad agreement on this final element of banking union. European leaders, who will gather in Brussels later in the day, will sign off on it and the final touches will be made in negotiations with the European Parliament next year.
"The final pillar for the banking union has been achieved," Germany's Finance Minister Wolfgang Schaeuble told journalists.
The project's aim is to prevent a repeat of the turmoil when failing banks in countries from Ireland to Cyprus brought their states to the brink of bankruptcy.
By setting up a system to shutter troubled lenders, Europe would equip the ECB with the means of dealing with teetering banks. However, the scheme that has emerged, because of efforts to accommodate skeptical countries, is unwieldy.
It requires the ECB to fire the starting shot by declaring a bank as too weak to survive. What follows, however, involves input from a new agency empowered to shut banks, the European Commission and up to 18 different euro zone countries.
Schaeuble played down concerns that this could prove cumbersome. "It has to go quickly in an emergency, over a weekend," he said, adding that the new structure would be nimble enough to do so. Continued...