Tuesday, June 12, 2012
Eurozone banking union: The big bazooka
June 12, 2012
The European Council looks set to approve the first stage of a eurozone banking union at its meeting in late June.
President Jose Manuel Barroso's call in the Financial Times for Europe to create a single banking regulation system and a financial backstop is highly significant: Germany is believed to support a move to create at least stage one of the union rapidly, ie common supervision, with 1 January 2013 mooted as the start date.
However, a full banking union, in which the eurozone states agree to a common deposit guarantee, with the implied support of the eurozone states for systemically important banks would need a treaty change.
The UK government "quad" met last week to discuss the move and supports it, including the creation of a pan-euro backstop for the banks. However, the UK will remain outside, and will demand a strengthened 27-member single market in financial services.