The Greek crisis may be rather more photogenic than completing the reform of the EU’s financial system but there should be no doubt about the commitment to the latter. Greece and the high politics of euro area economic integration fill the headlines but the day-by-day activities in Brussels are dominated by the flow of new legislation on financial services. At a recent conference[1], the stream of proposals, and their significance to the future shape of the financial system, was underlined.
The backdrop is the fear that problems in the financial system may throw us back into the economics of the 1930’s so the first task is to prevent any further collapses of financial institutions – and if there must be, then the burden should not fall on tax payers. The chosen method is global co-operation though the G20 process and the EU has delivered on almost 100 per cent of its G20 commitments – at least in terms of the 29 pieces of legislation tabled at Level 1 by Commissioner Barnier.
But a big item remains – cross-border bank resolution within the EU. The Commission says it has the proposal fully worked through but is waiting for a propitious moment – both politically and in markets. However, the definition of propitious was not spelt out – though tantalisingly “soon and probably before summer”. The Presidency has this earmarked for discussion at the May ECOFIN meeting – providing the Commission has actually published it! Most market participants are fully aware that it is likely to involve a degree of “bailing in” of unsecured bank bond-holders and perhaps that uncertainty explains the funding difficulties of some banks.
The full article appeared in the February edition of Financial World - subscription required.
[1] 10th Annual European Financial Services Conference
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