EU taxpayers may gain from central rules
Source: Agencies |
June 7, 2012, Thursday
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Print Edition
Print Edition
THE European Union's executive branch proposed yesterday a system of centralized banking regulations that would ensure that taxpayers would never again have to bail out ailing banks whose collapse would threaten the wider economy.
Under the European Commission proposal, banks that posed no systemic risk to the national or international economy would simply be allowed to fail. But those whose failure would pose too grave a threat to the stability of financial markets would be propped up in part by having unsecured creditors of the bank, such as bondholders and shareholders, take losses rather than having taxpayers give the institution rescue money.
"We don't want taxpayers to have to pay," said Michel Barnier, the European commissioner responsible for the internal market, in Brussels yesterday. "We're going to break the link between banking crises and public budgets."
If he ever achieves that, however, it will be too late to alleviate the current banking crisis afflicting Europe and one of its biggest economies, Spain, where banks are sitting on huge losses that the government cannot afford to plug. It also offers no immediate guarantee that EU taxpayers are off the hook.
The complex proposal is not due to take effect fully until 2018. In any event, it also needs the approval of the European Council, composed of the leaders of the 27 EU countries, and the European Parliament, and may be significantly altered in the process of gaining approval.
Barnier emphasized he had been working on the proposal for years, and they were not a response to the banking crisis in Spain or other recent bank bailouts.
While Barnier said the centralized rules are necessary because so many banks operate across borders, he did not propose setting up a powerful central banking authority.
Under the European Commission proposal, banks that posed no systemic risk to the national or international economy would simply be allowed to fail. But those whose failure would pose too grave a threat to the stability of financial markets would be propped up in part by having unsecured creditors of the bank, such as bondholders and shareholders, take losses rather than having taxpayers give the institution rescue money.
"We don't want taxpayers to have to pay," said Michel Barnier, the European commissioner responsible for the internal market, in Brussels yesterday. "We're going to break the link between banking crises and public budgets."
If he ever achieves that, however, it will be too late to alleviate the current banking crisis afflicting Europe and one of its biggest economies, Spain, where banks are sitting on huge losses that the government cannot afford to plug. It also offers no immediate guarantee that EU taxpayers are off the hook.
The complex proposal is not due to take effect fully until 2018. In any event, it also needs the approval of the European Council, composed of the leaders of the 27 EU countries, and the European Parliament, and may be significantly altered in the process of gaining approval.
Barnier emphasized he had been working on the proposal for years, and they were not a response to the banking crisis in Spain or other recent bank bailouts.
While Barnier said the centralized rules are necessary because so many banks operate across borders, he did not propose setting up a powerful central banking authority.
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