After saying it would be a miracle that the often argumentative European leaders would not agree a deal this writer has to eat his own words because at 4am Thursday morning they agreed to the European Central Bank in charge of all Euro-area lenders.
The deal which a major step on the road towards a unified banking system will see the ECB directly supervise up to 200 of Europe’s biggest banks and have the ability to directly intervene in a struggling nation. The measures should see any further banking failures not ending up on the books of Eurozone governments limiting the impact of collapses as seen at the beginning of the 2007 Great Recession.
“We have reached the main points to establish a European banking supervisor that should take on its work in 2014,” said German
Finance Minister Wolfgang Schaeuble, after 14 hours of talks ended shortly before dawn on Thursday.
European commissioner President Jose Manuel Barroso said in a statement; “On behalf of the European Commission, I warmly welcome this exceptionally important agreement on the Single Supervisory Mechanism reached by the Council.
Based on the proposal tabled by the Commission on 12 September, this is a crucial and very substantive step towards completion of the banking union and a timely step forward in the integration of financial supervision for the euro area and for the other Member States which the Commission hopes will also participate.
We now hope that the co-legislators are able to finalize the agreement on the Single Supervisory Mechanism as quickly as possible. I want to underline that in four months we have moved from a Commission proposal to political agreement by the Council, which demonstrates once again that the European Union has the political will and capacity to act quickly on momentous issues.”
Under the deal banks with more than €30billion in assets will be put under the supervisory control of the European Central Bank. The ECB will then be able to intervene at the first sign of trouble and hopefully prevent a repeat of the Eurozone crisis that has brought several member countries to their knees. The new powers also enable the ECB to shut down banks that do not follow the rules and paves the way for bailout funds to go directly to struggling banks. It represents the first stage of a banking union – known as a Single Supervisory Mechanism (SSM) which EU leaders believe can be put in place without having to change EU treaties.
Issues still remain with members of the EU not being happy with the plans. Britain and other non-Euro using nations are concerned that the ECB could leave them isolated. London is the EU’s largest financial centre, overseeing by far the biggest proportion of currency exchanges. The UK government is demanding some guarantees that the city will not become isolated or be marginalised by key Eurozone decisions. Already the French have hinted that they would do what they could to do so.
“Piece by piece, brick by brick, the banking union will be built on this first fundamental step today,” said EU Commissioner Michel Barnier.
The Pound to Euro exchange rate is currently trading at 1.2340
The Pound to US Dollar exchange rate is currently trading at 1.6121
The Pound to Australian Dollar exchange rate is currently trading at 1.5280
The Euro to US Dollar exchange rate is currently trading at 1.3061
The Euro to Pound exchange rate is currently trading at 0.8102
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