BRUSSELS – European finance ministers tried Monday to agree on how to set up a joint authority that can restructure or shut down failing banks. A deal, they say, would be the final step in their effort to create a banking union that would stabilize the financial system.
Governments of the 28-nation EU are currently in tense negotiations with the European Parliament over the fine print of setting up the so-called single resolution mechanism, which will have the power to shut down or restructure banks across Europe.
To avoid significantly delaying the project, an agreement must be reached by the end of the month to ensure the legislation’s passage during Parliament’s last plenary voting session in mid-April before elections due in May.
“We all have to make an effort to reach a compromise,” French Finance Minister Pierre Moscovici insisted upon his arrival for the ministers’ meeting in Brussels.
Voicing cautious optimism, Moscovici added the issues at stake are “substantial but not insuperable.”
Without a deal, the project would likely be delayed by at least a year. That would hold up the rest of the banking union, in particular the new centralized banking oversight agency, which is anchored with the European Central Bank.
The finance ministers and European lawmakers are at odds over the bank rescue authority’s decision-making structure, on the degree of financial solidarity between the participating nations and on whether the fund should be able to borrow money on markets to ensure it can manage in times of crisis.
The new body will be financed by a bank levy that would raise 55 billion euros ($75 billion) over ten years by 2026. However, before any of its money is used to rescue a bank, the bank’s creditors, including holders of large deposits, will be forced to take losses.
Ministers gave themselves two days of discussions in Brussels to reach a new negotiating position before resuming talks with lawmakers Wednesday.