Euro banking union is ‘vital’
“Of course, it is difficult to build consensus in a situation where bank resolutions may become necessary, and deposit insurance schemes could be called on, in the near future. This is a matter that ideally should have been discussed and settled when EMU was formed, much in the same way as a car must be insured before it can be driven. Unfortunately, that route was not taken,” Mr Gerlach told a conference in Florence yesterday.
Last year at the Jun 29 EU Summit, eurozone leaders agreed to break the link between the banking system and member states by enabling the ESM to directly recapitalise troubled banks. However, the German government insisted that a Single Supervisory Mechanism (SSM) is set up before banking union can proceed. After much negotiation, it has been agreed that the SSM will be located in the ECB, although this has attracted much criticism.
