DEXIA : EU Banking Union Details Emerge at G20
06/18/2012| 08:47pm US/Eastern
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By Frances Robinson and Will Horobin
Plans for a European banking union appeared to be gaining momentum at the Group of 20 leaders summit, as the European Commission said it would present its proposal this fall.
"We can and should now move further towards banking union," European Commission President Jose Manuel Barroso said Monday, adding the proposals would "complement and deepen what we have already put on the table."
Officials who support the plan for greater integration of Europe's financial institutions said a consensus is building among EU members, and that the union would be mentioned in the G20 agreement due to be released on Tuesday.
"All the European countries spoke with one voice, whether euro zone or not euro zone," an official from a G20 nation said, adding the U.S. has been "extremely helpful and cooperative" in this process.
However, getting agreement on a single set of rules for a banking union may still prove difficult. Germany has consistently stressed that greater sharing of risk can only be done in exchange for giving up certain aspects of sovereignty. Chancellor Angela Merkel didn't mention the plan when she briefed reporters in Mexico.
The bloc's executive arm has been pushing for a single regulator, a single deposit guarantee scheme and common rulebook for the region's banks. Now the plan is gathering momentum, with the European Central Bank saying earlier this month that such a structure is the "integral counterpart" of monetary union.
The collapse of highly-integrated banks spanning several countries, such as Belgo-Dutch banking and insurance company Fortis NV, precipitated the European chapter of the global financial crisis. Regulators and governments are still puzzling over state guarantees for Franco-Belgian bank Dexia SA.
There is also a need for greater clarity as the EU mulls how to get aid to Spain's debt-stricken banks. There is an agreement to provide 100 billion euros ($126 billion) of guarantees--but not how to deliver the funds, with the commission pushing for aid to go directly to bypass the country's government so as not to weigh on its deficit.
European Council President Herman van Rompuy said EU authorities would work to address concerns about sovereignty that have held up the process so far.
"The first priority is to work on a system of integrated bank supervision which will increase transparency and control of risks," he told reporters. "And as the sharing of risks and the sharing of control have to go hand in hand we will also call for a speedy development of proposals of the European Commission regarding common resolution frameworks and deposit insurance which are already on the table."
Reaching a consensus on closer banking union would also please the EU's peers. White House spokesman Jay Carney said U.S. President Barack Obama had a "constructive" meeting with Merkel. Obama will meet with Barroso and Van Rompuy later Monday.
"The president was encouraged by what he heard regarding ongoing discussions in Europe about the path their pursuing to address the crisis," Mr. Carney said. "The two leaders talked about the importance of taking steps to promote financial stability and increase European integration."
-Write to Frances Robinson at frances.robinson@dowjones.com
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