EU May Be Able to Speed Pace of Pooling Bank Fund, Sadzius Says

The European Union may be able to speed up the pace of creating a common resolution fund for euro-area lenders, said Lithuanian Finance Minister Rimantas Sadzius.

EU nations need to reach a deal with the European Parliament “as soon as possible” on how to move ahead with the proposed Single Resolution Mechanism, the next step in the euro area’s banking union project, Sadzius said in an interview in Brussels today. One path forward might be to pool resources in the fund at a faster pace than the 10 years it will take to fill the fund using bank industry fees, he said.

“We do have the space to shorten the term of mutualization,” Sadzius said.

European Central Bank President Mario Draghi has urged ministers to make the full fund available to all participating nations within five years. German Finance Minister Wolfgang Schaeuble has pushed back to say the fund can’t phase out its initial national compartments any faster than it moves to full strength. The issue has exacerbated the negotiating deadlock as ministers meet in Brussels today and tomorrow.

“The situation for Mr. Schaeuble is no easier now than it was with the old government, maybe even more complicated on some points,” Luxembourg Finance Minister Pierre Gramegna told reporters today after a meeting of euro-area finance chiefs in the Belgian capital.

Two Tracks

“There was no sign of any more flexibility from Germany, even if Mr. Schaeuble intervened on all these points and tried to explain his position,” Gramegna said. “We were not able to reach an accord on the different points today because the philosophies are different.”

Resolution talks are taking place on two tracks: a law to set up the new agency and an accompanying agreement among nations on how the fund will operate. Sadzius said it may be possible to simplify the system and narrow the scope of the intergovernmental agreement, which cuts the EU assembly out of decision making.

“If we stick to the idea that we have a regulation and an agreement, we have still a possibility to decide where the border should go,” Sadzius said. “Perhaps a quite logical direction to consider is to somehow shrink the area of this intergovernmental agreement in favor of the regulation.”

Schaeuble said today there may be some leeway on the resolution mechanism details. He said nations will need to maintain control of the fund, while also negotiating with the parliament on other issues.

National Barriers

“One can come to different solutions on individual questions, but in principle the structure must remain,” Schaeuble told reporters. “As long as only the member states can levy a fee, they have to assume responsibility for the fee being levied.”

European Parliament negotiators, who will attend the meetings among nations tonight, said the resolution system has to break down national barriers so the banking union doesn’t discriminate based on location.

“Parliament cannot accept to sign up to a system which could fail its first tests because this will keep taxpayers at the forefront of paying for bank risks and develops a system of privileged and under-class banks based on national affiliation,” according to a statement from parliament members Elisa Ferreira, Sven Giegold, Sharon Bowles and four others.

Irish Finance Minister Michael Noonan said the goal is to reach a deal when ministers reconvene next month, in order to settle the issue with the parliament before EU elections in May. He predicted decisions on how fast to pool the new fund’s resources would be put off until then.

‘Big Issue’

“Banking union is still the big issue in its various manifestations and I expect progress to be made, but I don’t expect it to complete today or tomorrow,” Noonan said. “We hope that everything will be done and dusted by the council meeting in March.”

Dutch Finance Minister Jeroen Dijsselbloem echoed Noonan’s assessment in comments to reporters midway through the talks.

“Don’t expect too much out of tonight’s meeting,” Dijsselbloem said. “We’ll try to make as much progress as we can in order to reach an agreement in March.”

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