E.U. Officials Quarrel Over the Pace of Bank Reform
|
Version 0 of 1. BRUSSELS — Top E.U. finance officials clashed Tuesday over how quickly to establish a common fund and rule book for overhauling or closing down failing banks. Wolfgang Schäuble, the German finance minister, repeating a theme he has been stressing lately, said a change to the E.U. treaty — a politically hazardous process that can take years — would be needed to carry out those banking plans in full. “I need a solid basis in the treaty,” Mr. Schäuble, referring to the creation of a single authority for shutting down banks, told the monthly meeting of finance ministers. “A two-step approach,” one that would start with a network of national authorities, was more feasible, he suggested. But Jörg Asmussen, an influential member of the executive board of the European Central Bank, countered the Schäuble position by calling for a much faster march toward a uniform system of fixing bad banks. “We want a single European resolution regime, together with a single resolution agency and a single resolution fund that is financed by a levy from the banking industry,” Mr. Asmussen told reporters outside the meeting. “This should come into place in parallel with the single supervisory mechanism hopefully by the summer of next year,” said Mr. Asmussen. Although himself a German, Mr. Asmussen is not in league with Mr. Schäuble, a member of Chancellor Angela Merkel’s administration. And as a central banker, he is more focused on ensuring the smooth functioning of the euro zone’s major lenders. Meanwhile, ramping up their fight against tax evasion, the finance ministers also gave a green-light for the European Commission to hold tax negotiations with Switzerland, Liechtenstein and three other tiny non-European Union states whose largely opaque financial sectors have been used by E.U. residents to hide undeclared assets. But Austria and Luxembourg, both of which are renowned for their culture of banking secrecy, blocked efforts to expand the scope of information that banks in the European Union are obligated to share with tax authorities. Luxembourg last month agreed to share data about interest income earned by E.U. citizens holding accounts in the country, something that Austria still refuses to do. But the two countries stood together Tuesday in rejecting proposals that would also make life insurance and other “savings-like” instruments subject to information exchange. Luc Frieden, Luxembourg’s finance minister, told a news conference that his country “is not against the fight against tax fraud” but wants a “level playing field” that does not allow banking centers outside the Union like Switzerland to gain a competitive advantage. Like Austria, Luxembourg is wary of money havens that have not signed up to the Union’s transparency rules. Algirdas Semeta, the E.U. tax commissioner, expressed “great disappointment,” and said the issue will now be taken up by a summit of European leaders next week. The commission has estimated that member states together lose about €1 trillion each year from illegal tax evasion, along with aggressive, but legal, tax avoidance. They are losses that Europeans governments are increasingly determined to recoup at a time when a deep economic slump has sharply reduced revenues. The banking bailout issues remain thorny. As the crisis in Europe has unfolded, states and ultimately taxpayers from Britain to Spain have shouldered the cost of bailing out lenders hobbled in many cases by property and credit booms gone sour. The meltdown helped to drive up the cost of sovereign borrowing, damaged investor confidence and inhibited the ability of many banks to restart lending. E.U. leaders have agreed on the need to break the so-called doom loop, where states go deeply into debt to support failing banks. Late last year, only after an exhausting series of all-night meetings, the finance ministers agreed to put some of the biggest banks in the European Union under the authority of the E.C.B. But analysts say a key next step in giving European authorities more sway over the Continent’s banking — agreeing to the system for restructuring and shutting banks — may be even harder to achieve. “The discord in Brussels illustrates the difficulty that the E.U. faces — how to develop a practical and credible response to the financial crisis and the problems in the euro zone that is politically and legally acceptable,” Alexandria Carr, a lawyer at Mayer Brown in London and a former a legal advisor at the British Treasury, said Tuesday. The divisions must be overcome for Europe to create a full-fledged banking union. Such a union is increasingly seen as critical to the stability of the euro zone and to the recovery of the economy in the entire 27-member European Union. “The main subject of all our partners throughout the world was, ‘How are you getting on with the banking union?”’ Jeroen Dijsselbloem, the president of the group of finance ministers overseeing the euro and the Dutch finance minister, told the finance ministers meeting. Mr. Dijsselbloem, who was describing the recent meeting of ministers from the Group of Seven nations, said the banking union “is at the moment the biggest project for Europe.” One stumbling block to a banking union is Germany, which has already contributed the most money to bailouts for countries like Greece. But many German lawmakers are wary of committing to policies that could mean even more payouts in the future, as the country’s politicians hunker down ahead of a national election in September. Another obstacle is getting finance ministers to agree on the common rule book for imposing losses on bank creditors and depositors during a banking bailout. There, too, rifts were evident Tuesday as ministers expressed differing views on whether to lay down strict rules for when to require such losses. The Spanish economy minister, Luis de Guindos, told the meeting that insured deposits — those of €100,000, or less — could become vulnerable under some circumstances if uninsured depositors with higher balances were force to take losses along with bank bondholders during crises. Such losses were, in fact, recently imposed in the Cyprus bailout. “I can assure you that if a bank suffers a run in deposits above €100,000, the deposits below €100,000 will also suffer,” said Mr. de Guindos, without elaborating. “So I think this is a little bit artificial and I think we should try to concentrate” so “that all the deposits are protected.” But George Osborne, the British chancellor of the Exchequer, was among the ministers who warned against rules explicitly excluding depositors from losses, as risking an unintended outcome. “We’ve got to stand behind our commitment to insured depositors,” said Mr. Osborne, referring to the need to protect savers with accounts of €100,000 or less. But “for uninsured depositors, it’s a more complicated issue,” he said, using the example of the way the banking system operated in Cyprus, which received an international rescue earlier this year. “If you look at the Cypriot situation, I think quite a lot of the uninsured depositors were Russian shell companies,” said Mr. Osborne. “Now, do we really want to protect them over the Cypriot pension funds that have gone and bought Cypriot bank debt?” <em>Andrew Higgins contributed reporting.</em> |