Finland’s banks are “very worried” by a European Commission proposal to create a euro-area mechanism for handling failing banks backed by a common fund, Finance Minister Jutta Urpilainen said.
European Union governments are racing to meet a year-end deadline for a common position on the commission’s plan for a Single Resolution Mechanism with a fund filled by levies on banks. The bank-failure system is the second element of a planned banking union that began by vesting the European Central bank with oversight powers over euro-area banks.
“Finland hasn’t taken a stance on whether we’re ready to accept a European crisis resolution fund,” Urpilainen told reporters in Helsinki today. “We see certain benefits, but especially the industry in Finland has been very worried and that’s why we haven’t decided on our final stance yet.”
The Federation of Finnish Financial Services prefers a network of national crisis-resolution funds to a single fund, which would strongly increase joint liability, Managing Director Piia-Noora Kauppi said on Oct. 16.
Germany has led opposition to the proposal presented in July by the EU’s financial-services chief, Michel Barnier, challenging its legal basis and warning it could weaken governments’ control over their budgets.
“Germany has had very strong opinions on the crisis resolution authority and we’re in wait-and-see mode on whether Germany holds on to these strong views,” she said. “That will have an impact on the direction the negotiations take.”
In Vilnius last month, Urpilainen said the Single Resolution Mechanism should be “as independent as possible and with as narrow a mandate as possible,” and that Finland wasn’t “at all excited” by the decisive role ascribed to the commission in Barnier’s proposal. She expressed hope that a deal could be reached this year.
The mechanism must have effective and adequately defined powers, according to a letter from the Finnish government to the parliament dated Sept. 12 that sets out its stance. “The joint crisis resolution mechanism’s powers of deliberation must be limited to the controlled winding down of the bank at the center of the crisis management operation,” according to the letter.
“There are several troublesome issues that we have hoped the commission will change,” Urpilainen said today. “The negotiations are very open. Finland’s government plans to specify its stance in the near future when we see what direction the negotiations take.”
Urpilainen said European Parliament elections scheduled for May increase the urgency to hammer out a deal quickly. Parliament must approve the bill before it can become law.
“Decisions need to be taken quickly if we want to take this through during this European Parliament term,” Urpilainen said. “There isn’t a lot of time to lose and that will add to the pressure to take a decision.”