EU Banking Union Timeline From June 2012 Summit to Coming Events
The following are upcoming events in the European Union’s push toward banking union. Below those is a timeline of developments beginning with the June 2012 summit when EU leaders committed to financial integration to fight the euro debt and banking crisis.
UPCOMING in September-December 2013:
* European Parliament on track to hold vote on Single Supervisory Mechanism this month, paving way for ECB to take up new duties as soon as September 2014.
* EU finance ministers gathering in Vilnius, Lithuania, Sept. 13-14 have their first chance to discuss the Single Resolution Mechanism proposal.
* Nations and European Parliament to hold negotiations on final version of bank resolution and recovery directive.
* EU nations to develop joint stance on EU law to set standards for national deposit-guarantee schemes. European Parliament also needs to reconsider its negotiating position, and then talks between nations and parliament can proceed.
* ECB comprehensive review of euro-area banks that includes an assessment of risks, balance sheets and stress testing to start before end of the year.
* ESM continues preparations for direct recapitalization instrument, which must win approval from national parliaments. It’s also contingent on other elements of banking union moving forward.
PAST DEVELOPMENTS: 2012-13
* June 29, 2012: Euro-area leaders “affirm that it is imperative to break the vicious link between banks and sovereigns” and call for a single supervisory mechanism involving the European Central Bank. Statement calls for special consideration for Ireland’s bank bailout.
* June 29: Euro leaders introduce possibility of direct recapitalization of banks by the then-forthcoming European Stability Mechanism, with eye toward easing impact of Spanish financial-sector bailout via retroactive assistance.
* July 12: EU Financial Services Chief Michel Barnier calls for pan-European banking supervision “with real teeth,” accompanied by a joint bank-resolution system and pooled deposit guarantees.
* July 18: IMF calls on euro-area authorities and ECB to stand behind deposit insurance in the currency zone, in order to forestall bank runs.
* July 20: Eurogroup signs off on rescue program of up to 100 billion euros ($132 billion) for Spanish banks, to be channelled through Spain’s government.
* July 24: Spanish, Italian bond yields reach euro-era record highs.
* July 26: ECB President Mario Draghi pledges policy makers will do “whatever it takes” to save the euro.
* Sept. 6: ECB announces “Outright Monetary Transactions” program of potentially unlimited sovereign bond-buying to address market distortions, if conditions met.
* Sept. 12: European Commission releases proposals to make ECB supervisor of all EU area banks, with power to grant and retract banking licenses, in presentation to European Parliament in Strasbourg.
* Sept. 14-15: EU finance ministers meeting in Cyprus clash over scope, timetable for ECB bank supervision. German Finance Minister Wolfgang Schaeuble says the EU risks a backlash if joint supervision misses its deadlines. Barnier says he won’t pursue cross-border deposit insurance plans in order to focus on common oversight, saying there shouldn’t be an “open-ended kitty” to backstop savers.
* Sept. 25: “Legacy assets” become politically explosive after joint statement from Germany, the Netherlands and Finland that says direct ESM aid should be a last resort for banks, with “legacy assets under the responsibility of national authorities.”
* Oct. 8: The permanent 500 billion-euro European Stability Mechanism becomes operational, replacing the temporary European Financial Stability Facility as the euro area’s firewall fund.
* Oct. 9: Germany’s Schaeuble says debate over legacy assets is a “phantom” and a transfer of legacy bailouts is not compatible with firewall fund agreements.
* Oct. 18: EU leaders declare Single Supervisory Mechanism is “a matter of priority” with goal for deal by Jan. 1 2013. Leaders also call for “rapid adoption” of EU-wide laws to standardize resolution and deposit-guarantee frameworks in each nation.
* Oct. 21: German Chancellor Angela Merkel says Ireland is a “special case” that might qualify for retroactive banking aid from ESM, in joint statement with Irish Prime Minister Enda Kenny.
* Nov. 6: German-led alliance continues resistance to ECB supervision of all euro-area banks, with proposed limits on jurisdiction and management.
* Nov. 13: ECB pushes back against calls to limit number of banks subject to joint oversight, echoing Oct. 25 position from European Commission.
* Nov. 29: European Parliament agrees on its negotiating position for law to turn ECB into bank supervisor.
* Dec. 4: Schaeuble warns Germany might veto banking supervisor legislation.
* Dec. 5: EU President Herman Van Rompuy report “Towards a Genuine Economic and Monetary Union” calls for Single Supervisory Mechanism as well as common national standards on bank resolution and deposit insurance, in “stage one” to be completed by end of 2013.
* Dec. 13: EU finance ministers reach common position on Single Supervisory Mechanism, paving way for talks with European Parliament.
* Dec. 14: EU leaders say “it is imperative to break the vicious circle between banks and sovereigns” and call for “an operational framework, including a definition of legacy assets, should be agreed as soon as possible,” at summit in Brussels.
* Jan. 24, 2013: Dutch Finance Minister Jeroen Dijsselbloem, in his debut appearance as Eurogroup chief, says Spain won’t seek direct ESM aid for its banks after all.
* Jan. 29-30: Germany, the Netherlands and Finland call for rules on forced creditor losses at failing banks to be implemented in 2015, three years earlier than proposed by EU draft law, in technical meetings in Brussels.
* Feb. 8: Irish Finance Minister Michael Noonan says question of using ESM for retroactive bank aid may be on hold until 2014, in comments shortly after Ireland strikes deal with ECB on promissory notes used to rescue Anglo Irish debt.
* March 11: ECB says about 140 large, systemic banks will be under its direct, day-to-day oversight.
* March 13: Germany urges EU to abandon plans for a powerful central authority to handle bank failures, in behind-the-scenes paper that does not reach the public until April 30.
* March 15: EU leaders reaffirm “that it is imperative to break the vicious circle between banks and sovereigns” in statement after two-day summit in Brussels.
* March 16: Euro area announces Cyprus bailout plan that would tax insured as well as uninsured depositors, sparking outrage in Cyprus and roiling financial markets.
* March 25: Euro area announces revamped Cyprus bailout plan that restructures the nation’s two largest banks and spares insured depositors.
* March 19: EU governments and European Parliament reach provisional deal on legislation to make the ECB euro-area bank supervisor.
* April 12: EU finance ministers agree to “work constructively” to consider treaty changes, in bid to prevent Germany from blocking transition to ECB as single supervisor. It becomes clear ECB supervision won’t start until at least the second half of 2014.
* April 18: EU approves law to turn ECB into euro-area bank supervisor.
* April 24: ECB Vice President Vitor Constancio says EU needs “strong” central authority to handle bank failures, saying coordination alone won’t be sufficient.
* May 2: Draghi says ECB’s governing council “emphasizes that the future Single Supervisory Mechanism and a Single Resolution Mechanism are crucial elements for moving towards re-integrating the banking system and therefore require swift implementation.”
* May 7: EU Economic and Monetary Affairs Commissioner Olli Rehn says direct ESM bank aid is key to breaking the bank-sovereign link.
* May 12: Germany’s Schaeuble calls for a “two-step” approach to banking union, saying resolution should remain decentralized. Without treaty change, the EU can build “a timber-framed, not steel-framed, banking union.”
* May 16: European Banking Authority delays bank stress tests until 2014, in order to make room for the ECB’s asset-quality reviews of banks joining the euro-area supervision regime. In 2011, EBA stress tests were criticized for failing to catch problems.
* May 20: European Parliament agrees on its negotiating position for bank-resolution standards law, paving way for negotiations with nations.
* May 24: ECB’s Constancio lays out two-pronged approach for assessing banks as central bank becomes supervisor, starting with balance-sheet assessment and moving to forward-looking assessments and stress tests.
* May 30: Merkel and French President Francois Hollande endorse banking union effort, provided new supervisor “implemented effectively” and guidelines for developing a joint resolution system put in place. This deal paves way for German-French agreement to delay availability of direct ESM for banks until at least 2014.
* June 6: Draghi says governments need, at a minimum, to make “an explicit commitment” to a backstop for capital shortfalls uncovered in the ECB’s asset-quality reviews.
* June 20: Euro area agrees on outline of rules for when the ESM can recapitalize banks directly, with stipulation that no aid possible until after EU bank-resolution standards law becomes final.
* June 21: Ireland says will continue to investigate retroactive ESM bank aid, after euro-area ministers agree to consider on a “case-by-case” basis.
* June 22: EU finance ministers fail to reach deal on bank-resolution standards law after 19 hours of talks in Luxembourg.
* June 27: EU finance ministers reach deal on bank resolution and recovery directive after seven hours of emergency talks in Brussels, clearing the way for talks to begin with European Parliament on final version, with goal of year-end deal.
* July 10: The European Commission’s competition enforcement unit releases new guidelines on state aid that require some private creditors to take losses before governments can step in. The new rules took effect Aug. 1.
* July 10: European Commission releases proposal for a euro-area Single Resolution Mechanism, including 55 billion-euro common fund. The plan, which will be debated by nations and the European Parliament, would give the Brussels-based commission final say in when to close a bank.
* July 15: Germany’s Schaeuble says joint resolution plan isn’t realistic.
* Aug 29: ECB Executive Board member Yves Mersch says the ECB won’t start its asset-quality reviews unless the EU has a backstop in place, also says central bank will begin with a risk assessment ahead of full balance sheet reviews.
* Aug 29: EU’s Barnier says there is no alternative to a single system for handling failing banks. “There is no plan B.”
* Sept. 5: Eurogroup chief Dijsselbloem says ECB bank supervision to start October 2014. He says access to ESM direct recapitalization will be “very difficult” during transition period as ECB conducts bank balance-sheet reviews.
* Sept. 5: Draghi says ECB will offer first full communication on bank balance-sheet assessments by mid-October.
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