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Gene Ellis

Europe's banking union: Till default do us part | The Economist - 0 views

www.economist.com/...s-it-solves-till-default-do-us

shared by Gene Ellis on 29 Oct 13 - No Cached
  • Almost a year ago, as the euro crisis raged, Europe’s leaders boldly pledged a union to break the dangerous link between indebted governments and ailing banking systems, where the troubles of one threatened to pull down the other.
  • Almost everyone involved agrees that in theory a banking union ought to have three legs.
  • a single supervisor
  • ...8 more annotations...
  • the powers to “resolve” failed banks
  • these powers also require a pot of money (or at least a promise to pay) to clean up the mess l
  • The third leg is a credible euro-wide guarantee on deposits to reassure savers that a euro in an Italian or Spanish bank is just as safe as one in a German or Dutch bank.
  • He dryly notes that Germany couldn’t even force its own savings banks to join its national deposit-insurance scheme.
  • Each country in the euro has its own bankruptcy code
  • Putting the European Central Bank (ECB) in charge of the region’s biggest banks should end the cosy relationship between banks and regulators that allowed Irish and Spanish banks to keep lending during property bubbles and the likes of Deutsche Bank to run with so little capital. If the ECB proves itself an effective supervisor
  • without ready access to a pot of money to fill these holes, the ECB could be reluctant to force banks to come clean. “It is madness to expose capital shortfalls if you don’t know where new capital is going to come from,” says one bank supervisor.
  • “If you wanted to challenge a decision, where would you go to court?” asks the head of a European bank regulator.
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