Banking Union agreement will help boost growth by stabilising Europe's financial institutions
11 Apr 2014
CB off 00:00
Building safeguards into Europe's banking system to prevent another crisis and ensure Europeans' savings. But how to establish a banking union without burdening the taxpayer?
CB on Hello and welcome to People First, the EPP Group's monthly program on issues with impact on people like you. Joining us to answer some of your questions is Corien Wortmann-Kool, you're a vice-president of the EPP Group here in the European Parliament and you're also a member of the Economic and Monetary Affairs committee. And quite an important responsibility considering the fact that we had these banking negotiations, and a European Parliament election coming up. Now how did that election speed up or slow down this process?
Corien Wortmann-Kool, Netherlands MEP Well it encouraged me to really fight for an effective and a credible banking union because when the banking union is in place, it should be able to resolve a failing bank over the weekend. And it took a lot of negotiations to get there, but finally did, and I'm very proud on behalf of the EPP, I'm very proud of this result. 1:13
CB on 1:55
Corinne, before we go to the questions, let's go to our report to find out a few more details about this banking union.
Banking crisis, economic crisis
CB off The near-meltdown of Europe's banking system during the financial crisis of 2008 triggered the deepest recession since World War II. It was a wake-up call to policymakers that Europe-wide oversight and safeguards were urgently needed. In addition to reforming economic governance and requiring a consolidation of public finances, there were calls to create a European banking union.
European Parliament CB off So far the plan approved by the European Parliament is for three pillars. A common banking supervisor, or Single Supervisory Mechanism, would have the power to monitor major banks and intervene if necessary.
ECB CB off The European Central Bank has been chosen to assume that job. Second pillar: a Single Resolution Mechanism to bail out, or to assist in closing down, a troubled bank, funded by a common fund collected from Eurozone banks. The ECB is also to have that role, though there could also be input from EU institutions or even national governments.
People at cash machines, at banks CB off Third pillar: a common deposit guarantee of up to 100,00 euros, guaranteed by a common Eurozone fund. The plan is for the ECB to begin its bank monitoring in November this year. The Single Resolution Mechanism is to come into force in 2016. The deposit guarantees are so far ensured only on a national level, but eventually a Eurozone fund is to cover them.
Berlin, German flags CB off Some countries, like Germany, are concerned about greater financial burdens and are reluctant to grant wider powers to the ECB. Some of those new powers could require a change of the EU treaty, a lengthy process.
European parliament exteriors, flags CB off But EU policymakers are urging action now to begin putting the safeguards into place, before a crisis comes knocking again.
CB on 2:05
And what about those countries that have opted out, like Denmark, like the UK? How do you have them part of this banking union?
CWK on Well ECB banking supervision will now be established for all banks inside the eurozone. But not yet all Eurozone member states can opt in, be a part and some are really eager to do so. And in any case, for those member states who don't want to join, when we have a more credible banking system inside the eurozone, it's also good for the European who are not in, so in any case they will benefit from this.
CB on 2:50
There is obviously concern among some Europeans. Here's one question from one of them, about this concern.
Vox pop question Hello I am Roland, I am Belgian and I would very much like to know if banking union will not in the end be paid for by the consumer.
Bonjour je suis Roland, je suis belge, et j'aimerai bien savoir si l'union bancaire ne va pas in fine être payée par le consommateur.
CB on Well, they're not supposed to but is there a risk that they will?
CWK on 3:03
There is much more assurance that not the consumers, and not he taxpayers, but that the investors will pay for a failing bank. Because that is now assured in a European directive, so Euroepan legislation which will be implemented in all the member states of the European Union. And inside the banking union, for the Eurozone countries, it will be even more harmonised, so this person will get much more assurance and that's incredibly important to avoid excessive risk taking, so I'm very proud on that.
CB on Another question is one about sovereignty. Here's a question on that from a country that has opted out of the euro.
Vox pop Q My name is Claus, I'm from Denmark, and my question is, will this banking reform give too much power to the ECB?
CB on 3:53
How do you counter that argument? If not the ECB, then who?
CWK on 3:58
Well, indeed, at national level, there are many cases central banks will supervise their banking systems.
But isn't that the wolf guarding the henhouse? Shouldn't there be somebody above that to watch it?
Well, there is a pretty thick wall between the ECB's monetary tasks and the ECB's supervisory tasks. And Denmark is one of the countries already interested to join. And this underlines that this independent supervisor of great credibility can really help to get this supervision established in a good way, and also for Danish people.
CB on 4:49
There's another question about – and this could be a Pandora's Box - the European treaty. Reopening the European treaty so that banking union could really work. To add more tools, I guess. This is a concern of a German student, here he is.
Vox pop Q My name is Stefan and I come from Germany, and I would like to ask whether the Lisbon Treaty must be changed for banking union.
Mein Name ist Stefan Valge und ich komme auss Deutschland und ich wurde fragen ob man den Lissabon Vertrag aendern muss fuer die Bankenunion.
CB on 5:06
Yes, so what about that?
CWK on We have proven in the past years that we can establish a banking union within the borders of the current treaty. And I think it's important that we don't have to wait until the treaty changes. And that was actually a main issue during the last five years. We've done much more than one could imagine. And for the future maybe a treaty change can be an issue. But it's not needed to establish the system as we have it now.
CB on 5:59
And then some would argue, well look, the crisis seems to be over. We're riding it out. So why have banking union, why now? Here's a question from somebody from that.
Vox pop Q Hello I am Susanne Dupont, I am French, and I live in Strasbourg. How will that reform be able to change things and will that allow us to avoid another eventual crisis?
Bonjour je m'appelle Susanne Dupont, je suis française, et j'habite Strasbourg. En quoi cette réforme va pouvoir changer les choses et est-ce que cela va pouvoir permettre d'éviter une autre crises éventuelle?
CB on 6:27
So things have calmed down, so why now?
CWK on That is the biggest risk, that due to the calming down of the markets, that we don't deliver on what we have promised. Which is a credible governance and reforms implemented in member states, which is ECB banking supervision, a credible banking union And when we don't deliver, I'm pretty sure that the next crisis will be even worse for the people of Europe. Therefore we have to continue and be determined, because we don't want a Europe as we are currently in with 1% economic growth. We want a Europe to really grow, so that these young people can find jobs and a good future. And a banking union is crucial for that.
CB on 7:13
And here is something a bit related to that, what you were just talking about, is that there is what many believe is a silent crisis still going on. The fact that you don't have enough affordable credit for companies, for individuals. And this is something that an Italian woman is very worried about.
Vox pop Q My name is Bianca Sandri, an I'm from Italy. My problems regarding the banking system, are essentially the costs, which are too high, and obviously the availability of credit. Because in this time of crisis especially, the banks have closed the taps. Mi chiamo Bianca Sandri, e sono dal'Italia. Mi problemi circa il sistema bancario, sono essenzialmente i costi chi sono troppo alti, e poi ovviamente, l'apertura di creddito, perche in questo periodo soppratutto in crisi, le banche hanno chiuso i robinetti.
CB on So how can banking union help this?
CWK on 8:09
Well, in Italy, where this lady is from, they indeed face a high funding cost. Because the markets don't trust the banks. They don't think the banks are credible. And when we get this ECB supervision, in the starting phase, these banks will be torn inside-out, in order to show whether they are really credible. And that will help this transparency, recapitalisation if needed, that these banks are trusted, and then the funding costs will go down automatically, which is extremely important for the SMEs in Italy, Spain, Ireland, and a lot of countries.
CB on 8:57
The fact that you've reached agreement between the European institutions on this plan, do you think that instils confidence that could maybe help the markets?
CWK on 9:08
Well indeed, I think the very ambitious agreement we achieved in itself will help. But also that we will implement it pretty soon. Next autumn, this autumn of 2014, the ECB supervision will start. And the next year, also the banking resolution authority. So it's very quickly.
CB on Corien Wortmann-Kool, thank you very much for fielding these questions.
Stand-up CB on That's it for now on People First.
Find out more about the activities of the largest political force in parliament by checking eppgroup.eu.
Until next time, thanks for watching!
Headline Banking union agreement will help boost growth by stabilising Europe's financial institutions, and avoiding burden on the taxpayer
Description A hard-fought banking union agreement reached between the European Parliament, Council and Commission will place the burden of failing banks on investors and not the taxpayer. With ECB supervision, banks could become more stable and encourage more investment to create jobs, says Corien Wortmann-Kool, a member of the Parliament's Economic and Monetary Affairs Committee.
Tags Banking union, ECB, Corien Wortmann-Kool, Brussels, European Union, taxpayers
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