Germany suggests ‘two-step’ approach to banking union

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Amending EU treaties to create a resolution mechanism “takes time,” Schaeuble wrote in an opinion piece in yesterday’s edition in the Financial Times.

“Luckily, the alternative is not between a legally shaky resolution authority now and the postponement of repair work on the banks. A two-step approach could start with a resolution mechanism based on a network of national authorities,” the minister suggested.

“Instead of a single European resolution fund – which the industry would take many years to fill – such a model would lean on national funds, which already exist in several member states,” he said.

Last June, EU leaders pledged to create a banking union, but deep cracks have emerged since then with regard to how such a scheme should look and Germany in particular has raised doubts about its overall feasibility.

The first step, to create a single bank supervisor under the European Central Bank, looks set to be in place by mid-2014, but a second pillar, a “resolution” agency and fund to close failed banks, is in doubt. – AFP.