European Union plans to pool supervision of banks must include as many of the bloc’s nations as possible if they’re to succeed, said Michel Barnier, the EU’s financial services chief.
“No non-eurozone country can be forced to participate. But my personal view is that we must do all we can to build a banking union for all 27” EU nations, Barnier said, according to an advance copy of a speech he’ll deliver in Washington today. The EU financial-services industry needs “a single rule book and integrated supervision” to avoid market fragmentation, he said.
Euro-area leaders said on June 29 that it’s “imperative to break the vicious circle between banks and sovereigns.” To this end, they said that once a single supervisor, involving the European Central Bank, is established, the euro area’s permanent bailout fund, the European Stability Mechanism, could recapitalize banks directly.
EU President Herman Van Rompuy has said the single supervision should be part of a broader banking union, also including a pooling of national bank-deposit guarantee programs and mutualizing funds to stabilize failing lenders.
The U.K. government has said that the country will not take part in the banking union plan.
“If we want one single European resolution system for failing banks, if national deposits insurance schemes are to be pooled, if the European Stability Mechanism is allowed to recapitalise banks directly, then we need pan-European supervision with real teeth,” Barnier said
Separately, Barnier said that the scandal surrounding banks’ manipulation of the London interbank offered rate was an example of how a lack of ethics in finance has damaged the economy.
“The reckless and immoral behavior of a few institutions has created enormous damage for the financial sector itself and society as a whole,” he said.