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Eurozone ministers agree on fund for failed banks in banking union talks

Eurozone ministers agree on fund for failed banks in banking union talks
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Eurozone finance ministers have agreed a key step towards a plan for a banking union – how to ensure financing for closing lenders down.

Banks will build up a fund of around 55 billion euros over 10 years. If there is a shortfall in the banks’ fund, national governments can impose more levies on lenders. If that does not suffice, they would then help with public money.

The partial agreement boosts the chances of an overall accord – which includes plans for one body to supervise banks under a Single Resolution Mechanism.

“All the points are still on the table – the whole SRM, the funds, the governors of the funds, the different rules and the set up, the gradual mutualisation – all these are still on the table. But I think the outlines of compromises on all these issues are beginning to come clear,” said the Eurogroup’s President Jeroen Dijsselbloem.

The complex measures were later being put to EU finance ministers from non-eurozone countries, ahead of Thursday’s full summit of European leaders.

“We are still very interested in hearing how to understand it, basically, because it raises a lot of questions, and before we make our minds up, we would like to make sure what are the answers to these questions,” Denmark’s Finance Minister Margrethe Vestager said as she arrived for Wednesday’s talks.

The plan so far is being seen as a victory for Germany which has been reluctant for eurozone countries to share the costs of winding down other nations’ banks.

Chancellor Merkel has said she hopes a deal on a banking union will be reached before Thursday’s summit. “For the acceptance of the euro on financial markets, the banking union is very important,” she said on Tuesday.