Eurozone finance ministers are moving closer to completing the final details of a banking union across the 17 countries, following a major breakthrough in the early hours of this morning.
Ministers have agreed a way to finance the closure of banks which fail including a €55 billion (£46.2 billion) fund which will be built up over the next decade by levies on banks.
Final details will need to be thrashed out before tomorrow’s two-day summit of EU leaders begins in Brussels.
German chancellor Angela Merkel said: “For the acceptance of the euro in financial markets, the banking union is very important. I hope that we, as heads of state and government, won’t have to deal with it.”
Dutch finance minister, Jeroen Dijsselbloem, who chaired the meeting, said the ministers had “prepared the ground” for a so-called Single Resolution Mechanism among all 28 EU countries and for a Single Resolution Fund across the 17-strong eurozone which will be overseen by the European Central Bank.
A draft statement said: “A common backstop will be developed during the transition period. Such a backstop will facilitate the borrowings by the SRF. The banking sector will ultimately be liable for repayment by means of levies in all participating member states.”
After the build-up phase in 2025, when the SRF is full, additional money for emergency financing could be raised by the SRF itself, the agreement added.
But ministers are worried the plans for winding up banks could prove over-complicated. “The proposal on governance looks very complicated,” said Michael Noonan, finance minister for Ireland.“In resolving a bank, one would want to be able to do it over a single weekend at the maximum. So anything that is too cumbersome….won’t be effective.”
The UK will remain outside the eurozone resolution mechanism. Banks here continue to be overseen by the Bank of England.
Eurozone finance ministers have already agreed not to introduce a single consumer compensation scheme across the area.