The race has been on for Finance Ministers to break a deadlock on the handling of Europe’s bank failures before next week’s EU summit – with France and Germany often at loggerheads over how the banking union would function.
However, Germany’s Finance Minister Wolfgang Schaeuble has now begun talks on giving the European Commission a role in the process – allowing them to contribute to the decision to shut a bank – something Germany had previously rejected.
In addition, a government official has stated Germany would now also consider splitting talks on the proposed Single Resolution Mechanism (SRM) with similar discussions on a decision-making mechanism.
The SRM mechanism would work with the Single Supervisory Mechanism (SSM) which is implementing direct supervision of euro-area banks by the European Central Bank (ECB) and Member States which have joined the Banking Union.
The SRM means if a bank under the SSM umbrella faced difficulties, it could be resolved with as small a cost to both taxpayers and the economy as possible.
After three years of financial turmoil and the bailing out of Cyprus, Greece, Ireland and Portugal, EU leaders have made this agreement a priority for the meeting taking place between the 19th and 20th of December.
The goal is to get the law finalised and on the books before the European Parliament recess before the May elections.
Finance ministers gathered yesterday to push resolutions for the proposal, which the ECB claims is essential for the Union’s efforts to avoid another financial crises.
Speaking of the possibility of resolving ongoing differences, Schaeuble noted, “There’s a chance. [But] it will be a lot of work.”
The ECB will start its supervision of euro-area banks in November 2014, and has stated its desire for a “strong and independent” resolution authority privy to a central fund for all costs.
Before Germany’s concessions, the EU nations had so far made little progress finding a compromise since the plan’s introduction in July.
The most combative issues include the aforementioned common fund, the range of the mechanism and who has the final say on whether a bank has to close.
Other outstanding issues of note include when the EU should began the planned tougher regulations on failing banks’ creditor losses, and concerns that countries outside the euro area (such as the UK) could face imbalanced costs if safeguards are not implemented into the rules.