Main menu (press 'Enter')
Access to page content (press 'Enter')
Direct access to list of other websites (press 'Enter')
Banking union
Top story :

Banking Union - Restoring confidence in Europe's banks

Economic and monetary union 14-04-2014 - 17:30 / Updated: 11-06-2014 - 14:10

The financial crisis that hit Europe in 2009 showed that many banks were not able to bear their losses and some even had to be propped up using tax payers' money. EU leaders were keen to avoid this happening again and drew up plans for a banking union that is now slowly taking shape. On 15 April MEPs approved rules for winding up failed banks. In September 2013 they already approved a proposal to give the European Central Bank the responsibility for supervising the euro zone's biggest banks. (Read more: Banking union: the shape of things to come)

Three measures to ensure that banks shoulder the risks of failure rather than relying on taxpayers to bail them out were approved by Parliament on Tuesday. Two deal with restructuring and winding down troubled banks, and the third ensures that banks, not taxpayers, guarantee deposits under €100,000 in the event of a run on a bank. These measures complement the single bank supervision system, already in place, and take the EU far down the road towards banking union. (Read more: Parliament lifts bank bailout burden from taxpayers’ shoulders)

MEPs on Thursday gave their green light to the EU bank supervision system which will bring some 150 of the EU's largest banks under the European Central Bank's direct oversight from September 2014. MEPs strengthened the system's transparency and accountability and tasked the European Banking Authority to develop supervisory practices which national bank supervisors should follow. (Read more: Green light for single supervisor for banks)

The banking union risks missing its goals under plans put forward by the EU’s finance ministers this week, warned EP President Martin Schulz. He issued the warning to EU heads of state in a speech at the opening of a Council summit in Brussels on 19 December at which the economic and monetary union would be discussed. Talking about the resolution system for dealing with failed banks, he said: “The slower and less efficient a system is, the more expensive it will ultimately be for everybody.” (Read more: Schulz on banking union: “The slower and inefficient a system is, the more expensive it will be” )

A banking union is being set up by the EU to help keep Europe's financial system stable and prevent another crisis from taking place. It requires finding a fast and efficient way to deal with failing banks while ensuring that taxpayers are spared from paying for bankers' mistakes. As MEPs prepare to vote on 15 April on an agreement with the Council on how to deal with failing banks, we take a closer look at the issues involved. Read on for an overview of how banking in Europe is about to change. (Read more: Banking union made easy: a five-minute guide to the EU's new rules)

From 1 January 2014, EU banks will be stronger. Changes voted by Parliament on Tuesday will cap banker's bonuses to curb speculative risk-taking, step up capital provisions to help banks cope better with crises and stiffen supervision. This EU banking reform package, the most comprehensive so far, should also spur growth, by making it easier for banks to lend to small firms that drive the real economy. (Read more: Parliament votes reform package to strengthen EU banks)

Deposits under €100,000 should not be used to prop up failing banks, according to a report adopted by the economic committee on 20 May. Instead, shareholders should bear the losses, followed by bondholders and only as a last resort large depositors. The report is a reaction to a proposal by the European Commission on how to support struggling banks, which also sets out strict rules for using tax payers' money. (Read more: Small depositors should be protected when a bank needs saving, demand MEPs)

REF. : 20140411TST43414
EU plan to improve banks

Staying afloat has been no easy task with the battering of the financial crisis. The EU's answer? A three-pillar plan to help banks weather future storms (28 May 2014)

Elisa Ferreira on winding up bust banks

MEP Elisa Ferreira on brokering a hard-won deal to protect the taxpayer when big banks fail. (3 April 2014)

Banking union approval

It's the end of a long road for MEPs pushing for banks to swallow their losses rather than Europe's taxpayers footing the bill. (15 April 2014)

Saving failing banks: who will foot the bill now?

The crisis has somewhat debunked the 'too big to fail' idea. But our contributors question Sharon Bowles on the real strength of the Single Resolution Mechanism to save. (16 April 2014)