Bundesbank deputy endorses single resolution authority

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The vice president of Germany's Bundesbank on Monday (10 June) called for an effective Europe-wide bank resolution authority, a position at odds with the German government which has been resistant to such a move.

The creation of a banking union in Europe, including a structure to wind-up failed banks, is widely seen as a missing link in efforts to bring the region's debt crisis to an end.

The EU’s commissioner for financial services, Michel Barnier, has said he will present a proposal this month, and also believes that a euro-area resolution fund for banks is a logical step in a currency union.

Bundesbank vice-president, Sabine Lautenschlaeger, said an EU-wide authority would be able to take a "bird's eye view" of financial institutions and implement a coherent concept for winding up failed banks more easily than national resolution authorities.

EU-wide authority able to move faster

"It doesn't make sense to supervise banks at the EU-level but then to push ahead with resolution at a national level," Lautenschlaeger said at a conference held by the Free Democrats (FDP), junior partner in Chancellor Angela Merkel's centre-right government, in Berlin.

She said an EU-wide mechanism would also be able to make decisions more quickly in crisis situations, as fewer people would take part in negotiations.

EU treaties would, however, need to be changed for it to be possible to set up an EU-wide resolution authority, she said.

The German government has been wary of any scheme that could empower an external agency to force the closure of one of its banks, or compel it to pick up part of the bill if a foreign bank ran aground.

Chancellor Angela Merkel did, however, recently propose a "resolution board" involving national authorities to take decisions on winding up failed banks.

German finance minister wants more time

German Deputy Finance Minister Thomas Steffen, speaking at the same conference as Lautenschlaeger, said the EU Commission would soon propose a centralised resolution authority that could make decisions at a European level.

"We'll see if we can come to an agreement on the legal side of things. We should not run the risk of this mechanism getting stopped by court action," he said.

German Finance Minister Wolfgang Schaeuble has said that a central authority should only be implemented in the long-term and that this would only be possible after changing EU treaties.

A supranational resolution mechanism is part of Europe's planned banking union which intends to make the continent's financial system more resistant to crises and includes setting up a common banking supervisor at the European Central Bank.

Timing has become a sensitive issue in Germany ahead of national elections in September this year, with leaders wary of any announcements that might result in large capital transfers to Mediterranean countries.

Timeline: 
  • June 2013: EU summit to discuss plans to deepen the Economic and Monetary Union
  • June 2013: European Commission to present proposals for single bank resolution mechanism and rescue fund
  • 22 Sept. 2013: German elections
  • May 2014: European elections
  • Mid-2014: Likely date for single supervisory framework to become effective (initial date foreseen was sometime in 2013)
  • 2015: Banking union expected to be fully in place (initial plan was 1 Jan. 2014).
  • 2014-2015-2016: Possible talks on revising the EU treaties (after the May 2014 European elections).
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