After years of resistance to plans for a European banking union, Germany has switched gear and has now decided to implement the EU rules one year in advance of schedule, sending alarm bells ringing among the country’s top banks and the Monopolies Commission. EurActiv Germany reports.
After a meeting of Merkel’s cabinet, German Finance Minister Wolfgang Schäuble praised a new draft law intended to implement the planned European banking union one year early.
It is an “important step to further strengthen trust in the stability of our common European currency,” Schäuble said, announcing the measure.
On Wednesday the German government tabled a package for national implementation in 2015. The Bundestag is expected to vote on the plan in November.
The move sparked harsh criticism from the country’s Monopolies Commission, a government advisory body, which argues taxpayer protection is not guaranteed by the measure.
By introducing EU-wide banking union one year earlier than required, German private banks fear competitive disadvantages within the EU will come about.
Daniel Zimmer, the chairman of the Monopolies Commission, said the banking union concept is “coherent in theory”. But he called for a clear message from politicians demonstrating that loopholes over liability of bank shareholders and creditors will be kept at a minimum.
“For the future it must be made clear that creditor liability will be consistently enforced,” Zimmer emphasised.
The creation of a banking union was the EU’s main answer to the financial crisis. Five years ago, banks across Europe were stabilised using billions of taxpayer money to prevent the financial meltdown from turning into a great depression.
In addition to a single bank supervisory authority at the European Central Bank (ECB), a special resolution mechanism makes up the second pillar of the banking union. EU-wide improvements to deposit guarantees also forms part of the new plan.
Taxpayers should be the last to shoulder a burden
Germany already has numerous national regulations on bank recovery and resolution. Now these are to be summarised into one law and improved to fit the new EU rules.
Something that is central to this process is a clearly organised sequence of liability. First shareholders, creditors and big depositors will be liable, followed by a new EU bank rescue fund. Only after these sources are exhausted, will taxpayers in the bank’s home country have to contribute financial support and only under the strict conditions of the European Stability Mechanism (ESM).
The Association of German Banks welcomed the implementation of the BRRD. In this way, the socialisation of risks in banking transactions will be counteracted, said the association’s general manager Michael Kemmer.
But to prevent distortions in competition, he said it is extremely important that the new liability rules come into effect simultaneously across the EU, not before.
At a summit in October 2012, EU leaders agreed plans to complete the European banking union by January 2014, after the general elections in Germany.
The concession was made to German Chancellor Angela Merkel who argued for "quality" over "speed" in putting in place the new supervisory system, seen as a cornerstone of the EU's efforts to end the eurozone' sovereign debt crisis.
- November 2014: Bundestag expected to vote on the German plan to implement the European Banking Union
- 2015: New rules expected to enter into force