Ireland seeks progress on tougher EU banking rules

Finance ministers to discuss how to cope with failing banks.

Common rules for fixing the problems of stricken banks are high on the agenda for the European Union’s finance ministers when they meet on Tuesday (14 May). However, the ministers will not reach a common position on the draft legislation, proposed by the European Commission 11 months ago.

 

Ireland, which holds the rotating presidency of the Council of Ministers until the end of June, had hoped to secure agreement at this meeting, but their negotiators are now aiming to win the necessary backing at the final meeting of finance ministers they will hold under their mandate, next month.

Striking a deal has become more complicated because of reaction to the €10 billion rescue programme for Cyprus that finance ministers agreed in March, and which imposed losses on ordinary bank deposits above €100,000.

The most controversial aspect of the Commission’s proposal is the hierarchy it recommends among creditors faced with contributing to the cost of winding up banks, and particularly where these ‘uninsured’ depositors fit in (deposits below €100,000 are ‘insured’ and member states have committed themselves not to touch these).

Talks between national ambassadors last week identified three distinct views among member states, each with almost equal support: to exclude uninsured deposits completely; to impose losses on uninsured deposits only when all other creditors have contributed; or to give member states the discretion to spare uninsured deposits if they choose to.

Once member states have reached an agreement among themselves they must agree on a final version of the law with the European Parliament. The Parliament’s economic and monetary affairs committee postponed a vote on its position last month.

Finance ministers will also discuss the latest developments on savings-tax transparency. This will take account of Luxembourg’s decision last month to sign up to the EU’s planned system for automatic exchange of information, which leaves Austria as the only EU country to oppose it.

Ministers might reach agreement on giving the EU a mandate to start negotiations on information exchange with other countries (Switzerland, Andorra, Lichtenstein, Monaco and San Marino). But with Austria still holding out, they are unlikely to find an accord on the main piece of legislation – increasing transparency of bank accounts in EU member states and introducing automatic exchange of information between countries.

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