EU battles to bridge gulf on bank supervision

12th December 2012, Comments 0 comments

EU finance ministers battled Wednesday to nail down a deal on a controversial single supervisor for banks as France, Germany, and even non-euro Britain, talked up the chances of a compromise.

Seen as key to taming the debt crisis and putting the bloc back on track, this first step in a hoped-for "banking union" agreed by European Union leaders in June could be followed by a formal accord at a two-day summit starting Thursday, the last of the year.

EU leaders want to tighten supervision as a condition for the bloc's bailout fund to be able to step in and directly recapitalise banks, instead of passing rescue funds through governments which adds to their sovereign debt loads.

Both Germany and France said they believed a breakthrough was possible.

"I think there is a good chance that we finish that today," said German Finance Minister Wolfgang Schaeuble on arrival.

Even if details remained to be worked out, he added: "I am confident that we find a solution on the banking supervision in time for Christmas."

"The parameters of a deal are there, it's within reach," French Finance Minister Pierre Moscovici told AFP.

He said officials had "worked intensely these last few days to bring our position closer to that of Germany," adding: "We have come together in a big way."

While German officials were unwilling to be drawn on details of the compromise, the Sueddeutsche Zeitung daily said the European Central Bank would supervise all "systemically relevant" and state-supported banks in the EU.

Other banks would continue under the aegis of national supervisors although the ECB would be given the power to intervene in them too under certain conditions, the newspaper reported.

Some six hours in, at around 1930 GMT, an EU official attending the talks said the "full set" of bones of contention were being addressed "in little groups, or huddles or tete-a-tetes."

"Everybody says it doesn't make sense to pass (the issue) on to the heads of government and their meeting tomorrow," said Austrian Finance Minister Maria Fekter.

Britain, which will not be joining the new regulatory club, has been very cautious, fearing it could undermine the role of the City of London financial centre, whose banks have extensive operations in Europe which would now come under the ECB's remit.

However, Chancellor of the Exchequer George Osborne took a positive note in his opening remarks, while still stressing that London's interests and those of other non-euro states would have to be taken into account.

"There is lots of room to make an agreement," Osborne said.

"We have a huge interest in this banking union working properly ... It's in everyone's interest that we have a better working banking system in Europe."

Finance Minister Anders Borg of Sweden, also staying out, said he could back an agreement but only if there was a good compromise with those countries which do join.

The key lies in the relationship between the European Banking Authority based in London which covers all 27 EU states and the ECB which will supervise banks in 17-nation eurozone.

Since the ECB under the new system would represent all 17 euro states, it would have an automatic majority at the EBA, effectively taking over the EBA and banking oversight throughout the EU.

Whatever the final decision, the new banking watchdog will still need parliamentary approval in key countries such as Germany.

Among other issues in the background, Germany and France found time Wednesday to say that a Greek debt buy-back programme had passed a critical test, clearing the way for payment of urgently needed bailout funds.

Separately, it emerged that the conservative group in the European Parliament, the assembly's largest group, had invited former Italian premier Silvio Berlusconi to party talks in Brussels on Thursday.

Berlusconi's party last week ended its support for Prime Minister Mario Monti and said he would run for office, for the sixth time in the last 20 years.

© 2012 AFP

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