Brussels, 08/12/2015 (Agence Europe) - On Tuesday 8 December, Germany called into question the legal base (article 114, 'single market') selected by the Commission for the proposed regulation to bring in a European deposit insurance scheme (EDIS).
“We are obliged to be very serious in the legal basis” of this legislative proposal, said the German finance minister, Wolfgang Schäuble, during a debate on banking union in the eurozone at the Ecofin Council. He argued that “article 114 is not a sufficient legal base”. “We will not accept it by no way”, he stressed, threatening that his country was prepared to bring the matter before the Court of Justice of the EU.
During the work on the 'resolution' plank of banking union, Germany took a similar line over the 'single market' legal base retained, which gives the European Parliament powers of co-decision. It unsuccessfully called for Treaty change, but secured the drafting of an intergovernmental agreement as a basis for the Single Resolution Fund (SRF) (see other article).
Schäuble nonetheless said that he was prepared to work towards an increased sharing of banking risks through the creation of the EDIS system. However, he once again stressed the need to work firstly to reduce the financial risks, for instance by limiting the exposure of the banks to the sovereign risk. In order to respond to these concerns, the proposed EDIS regulation of the European Commission is accompanied by a communication on the work the institution plans to carry out in order to reduce financial risks.
Finland broadly supported the German position, but described the work on the bank deposit guarantees as a “natural stage” leading to the completion of banking union. Work must also be carried out on the national options and leeway which are limiting the creation of a body of uniform rules of the banking sector, said the Finnish minister, Alexander Stubb.
Other countries, such as Italy and Spain, said that work must be carried out at the same time on sharing and reducing the financial risks, as the integration of the banking sector in Europe is likely by its nature to increase the “confidence” of the markets. As nobody knows where the next crisis will come from, we need to work “faster in risk-sharing”, because what is in place at the moment will not be enough in the event of a systemic shock, said the Greek minister, Euclide Tsakalatos, who is in favour of rules to limit excessive bank indebtedness.
The proposed regulation provides for the creation, in three phases, of a European bank deposit guarantee fund, to be fully pooled by the end of 2023 and with a total capacity in the region of €43 billion (0.8% of the bank deposits covered) (see EUROPE 11437). The Irish Minister, Michael Noonan, is reported to be in favour of the full pooling of the fund “sooner than that”.
Belgium expressed hopes that by mid-December, the European Council would be in a position to call, possibly not for the completion of banking union, but at least for its improvement. The draft conclusions, dated Monday 7 December, of the forthcoming European summit, of which EUROPE has had sight, stresses that the work to reduce the financial risks substantially and break the link between bank crises and public debt crises should progress “in parallel” to the work on the EDIS system.
By proposal of the Netherlands, an ad hoc working group on sharing and reducing the risks inherent to the banking sector will be set up by the end of the year. (Original version in French by Mathieu Bion)