EU leaders have set no date for banking union and call for plan to get there



EU flags fly in front of the headquarters of the European Commission in Brussels, Belgium, October 2, 2019. REUTERS / Yves Herman // File Photo

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BRUSSELS, Dec. 16 (Reuters) – European Union leaders on Thursday reiterated their political commitment to end the bloc’s banking union, but did not set a date for it, underlining deep disagreements between governments on what needs to be done to get there.

The EU banking union is now in place for the 19 euro-sharing countries, but non-euro area members of the 27-country bloc can also join. The project is to make the banking system in the euro zone more secure and more resistant to crises.

As part of the banking union, all major euro area banks have a single supervisor – the European Central Bank – and a single resolution authority that must liquidate failing euro area banks on a uniform basis.

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What is missing is a single deposit guarantee scheme that would ensure that any bank in any euro area country would always pay its customers deposits of up to 100,000 euros ($ 113,300) – a guarantee that would help avoid bank runs even in the event of a major banking crisis. .

Calls for the completion of the banking union mean the establishment of the deposit guarantee scheme, but eurozone finance ministers have made little progress. Executives only asked them on Thursday to write a plan to make it happen, rather than finding a complete solution now.

The main problem is that before a deposit system can be put in place, Germany’s primary concern is that euro-zone banks are less likely to collapse.

This is about reducing their bad debts and exposure to the debt of a single issuer, like the government of the country where they operate, so that they don’t go bankrupt if the sovereign they are most exposed to cannot repay. its obligations.

Limits on the amount of a single sovereign’s bonds a bank must hold are hard to swallow for Italy, which finances much of its borrowing from local banks. Some other southern countries share Italy’s objections.

($ 1 = 0.8826 euro)

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Report by Jan Strupczewski in Brussels Editing by Philip Blenkinsop and Matthew Lewis

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