EU financial structure to incorporate safety net

THE EU’s financial system is to have a comprehensive new supervision system in force from next January, aimed at preventing another financial crisis.

But while finance ministers finally agreed the new arrangement, they are deeply divided on devising a bank levy to offset future bailouts and on a financial sector tax.

The financial supervision system involves creating a European Systemic Risk Board (ESRB) to provide macro-prudential oversight of the financial system, and three supervisory authorities.

These will be a European Banking Authority (EBA); a European Insurance and Occupational Pensions Authority; and a European Securities and Markets Authority.

Belgian Finance Minister Didier Reynders, who chaired the meeting, said the system fulfilled one of the most important lessons to be learned from the crisis.

Internal Market Commissioner Michel Barnier presented his proposals on imposing a levy on the banks towards a fund that could be used instead of taxpayers’ money to resolve problem banks in future.

Each country would put the money collected into its own fund and there were no proposals on how it would be spent – whether it would go into a separate fund or into the national exchequer.

Britain, France and Germany have all announced levies and Sweden already has one in place. Luxembourg, a major banking centre, is concerned about the total burden being placed on the financial sector.

Germany and France also said the amount of additional capital that banks will be expected to have following the revision of the Basel III rules, needs to be considered.

Finance Minister Brian Lenihan’s attitude is the banking sector in Ireland is still very fragile, the banks are paying for the state guarantees and that the total burden would need to be taken into account in coming to a decision.


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