Joerg Asmussen, a member of the European Central Bank Executive Board, says the European Council needs to agree on the banking-union initiative by year-end. "In order to do this banking union judiciously, we need a hasty agreement; that means by the end of the year at the level of the European Council of Ministers," Asmussen said. He also says a supervisor for banks should be introduced "relatively simultaneously" with a bank-resolution regime.
The European Central Bank's efforts to develop a banking union is facing growing concerns from major governments. France and Germany have proposed keeping national authorities in charge of resolving troubled financial institutions. Meanwhile, the ECB is expected to keep interest rates stable.
Last year, European authorities committed to developing a banking union to prevent another financial crisis and shore up financial institutions. Less than a year later, concerns are emerging about the plan, which has three steps: Develop a single bank supervisor, a resolution entity to unwind failed banks and a single deposit-guarantee scheme. "The two, resolution and supervision, need to go together," AFME CEO Simon Lewis said. "There is a lot riding on it in terms of a positive message for the stability of the system."
The International Monetary Fund is increasing pressures on euro-zone nations to speed up development of a banking union. The IMF recently released a report about banking-union plans, emphasising a need to outline a timetable for developing a bank-resolution authority.
As negotiations about Europe's banking union bog down, the key to breaking the impasse seems to be implementing checks and balances on the European Central Bank's authority. Also, while the ECB argues that it should have authority over all euro-zone banks, Germany's Bundesbank has balked at the proposal.