EU lawmakers defy leaders over new bank regulator
European lawmakers defied EU leaders on Thursday, insisting that their new bank regulatory system meant to prevent a repetition of the economic crisis is fatally flawed and unworkable.
MEPs voted 441 in favour, 141 against, with 17 absentions to retain unchanged the European Parliament's negotiating mandate on what is known as the Single Regulatory Mechanism.
For it to come into effect, Parliament must approve the new system which was finally agreed by the 28 EU member states in December to great fanfare.
But MEPs believe the SRM will fail in its core objective of "ensuring that the taxpayer is not first in line to bail out banks that run into trouble," a Parliament statement said.
"The principal drawbacks are an overly complex and politicised decision-making process for winding up banks," it said.
Parliament believes the SRM must act quickly in a crisis, recalling that in the past the authorities have had to intervene over a weekend so as to minimise the impact of a failing bank on the financial markets when they reopen on a Monday.
As part of the compromises needed to get a deal in December, EU leaders agreed a decision-making structure which gives them the final say and minimises the role of the European Commission.
Critics says that could mean endless consultations between member states when speed is essential.
Additionally, a fund financed by the banks themselves to pay for any closure "would struggle to be credible in the first years of its life," Parliament said.
Another key element in the December accord, the new fund will be built up over 10 years to total 55 billion euros, a relatively modest sum given the scale of recent bank rescues.
This fund will also be established by treaties between the member state governments, rather than under the EU's treaty, meaning Parliament will have no say on it.
Given the differences, Parliament head Martin Schulz said he would ask member states to arrange an extraordinary meeting of EU finance ministers to discuss the issue ahead of their next regular gathering on February 17.
EU Financial Markets Commissioner Michel Barnier told MEPs that time was pressing for a solution, with Parliamentary elections due in May.
If no overall agreement is found by then, the SRM legislation could easily be delayed by a year or more.
As a result of the eurozone debt crisis, Brussels has tightened up oversight of member states public finances and of the banking system whose excesses many blame for making the problems much worse.
Member states have agreed common standards and rules for the banks to be policed in the eurozone by a new Single Supervisory Mechanism under the European Central Bank.
If this single surpervisor identifies a bank at risk of failure, the SRM is supposed to step in and stabilise or close it down before it can do any wider damage to the economy.
The December accord was worked out after very difficult negotiations, with some member states reluctant to cede powers to Brussels over such an important sector of the economy.
Parliament's opposition to the agreement, highlighted by Thursday's vote, was not unexpected but will very likely make for tough talks ahead.
© 2014 AFP