Banking union proves Frankfurt rules the day

The new banking union proposals that are now emerging from the wreckage of the European economy are to be given a very cautious welcome.

It’s clear that once again this is a win for mainly German banking interests. They have not wasted a good crisis, unlike our hapless crew of permanent and transitory governments.

A banking union required three essential elements: A common supervisor, a common system of deposit insurance or assurance, and a common method to resolve problems. What we have here is the first, and it’s as good a place to start as any. The power in European banking has now shifted decisively to Frankfurt — already building a new tower block at a cost of over €1bn. As currently proposed, the effect of the new regulator will be to shift regulatory control of AIB, IBRC, and Bank of Ireland to Frankfurt. What that will mean for the newly beefed-up regulator’s office in Dame St is unclear.