It's time to break the cycle. Banks' reckless lending helped to cause the financial crisis, leading to member states having to bail them out, which in turn caused countries to overstretch their budget. To prevent that happening again, experts call for a single supervisor of the banking industry, sufficient funds to deal with bank failures and a deposit guarantee for savers. On 29 November the EP's economic committee will vote on two reports on a proposed banking union in the EU.
Although MEPs support the idea of a banking union in the EU, they insist it has to be transparent and enjoy democratic legitimacy. Parliament is currently considering two legislative proposals by the European Commission on what the banking union should look like.
The first proposal suggests appointing the European Central Bank as the EU's bank supervisor. Belgian Christian Democrat MEP Marianne Thyssen wrote a report with recommendations on this proposal. The Parliament is being asked to comment on this proposal, but is not able to amend it or veto it.
Ms Thyssen said establishing a banking union was vital: "Europe has to draw its conclusions from the financial-economic crisis. One of the lessons learned is that we need a common European supervisor for all banks. With this supervisor we can prevent the banks from getting into trouble again in the future. This way, we restore confidence, we reinforce the financial sector and we protect the deposit holders and our economy."
Commenting on the Parliament's role in the negotiations on the banking union, Ms Thyssen said: "The common bank supervision will be mandatory for the 17 countries of the euro zone. At the same time, we want to make it as attractive as possible for other countries of the EU. The proposals in my report make shure that they do not play a secondary role in the future European banking union."
The second proposal works out the relations between the European banking authority, national banking regulators and the European Central bank as the new supervisor. German Green MEP Sven Giegold wrote a report with recommendations on this proposal. This proposal cannot be adopted without both the Parliament and the Council approving it. MEPs are also able to propose changes.
Experts say a banking union would also require a resolution fund. The fund would be a common pot to finance banks in trouble so that the cost of this would not be borne by one single country. This always tends to make financial markets panic and demand higher interest rates. In addition they believe there should be a deposit guarantee to protect savers