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Deeper union for Europe's banks

Wednesday, September 12, 2012 - 02:41

Sept. 12 - The European Commission's plan for the Central Bank to oversee individual banks in the euro zone has been met with cool response from Germany, which says fewer banks should be involved. Joanne Nicholson reports

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The European Commission's President called it a 'quantum leap' and it'll require an enormous leap of faith from Europe's banks. In Jose Manuel Barroso's equation, the European Central Bank will police the euro zone's lenders. (SOUNDBITE) (English) EUROPEAN COMMISSION PRESIDENT, JOSE MANUEL BARROSO, SAYING: "The single supervisory mechanism proposed today will create a reinforced architecture, with a core role for the European Central Bank and the proper articulation with the banking authority, which should restore confidence in the supervision of the banks in the euro area." The risk of an entire collapse of the financial system is what the European Commission's argument hinges on. Spain - the euro zone's fourth largest economy - has already sought 100 billion euros of aid to save its banks. Barroso's plan is three-fold: The ECB will monitor all euro zone banks, along with others in the wider EU that agree to it. There'll be a fund to close troubled banks And a scheme to protect bank customer deposits across the euro zone. The commission wants the plans to start by the middle of next year. UK banking lawyer Alex Carr. (SOUNDBITE) (English) ALEXANDRIA CARR, FORMER LEGAL ADVISOR TO HM TREASURY, AND OF COUNSEL, MAYER BROWN, SAYING: "The ECB is given a huge task - managing 6,000 banks cannot be done overnight and so it's asked to rely quite heavily on the national regulators firstly during the transitional period because this supervision is going to be phased in, it's got to direct all its instructions to the national regulators." The UK is outside the euro zone but it, along with Sweden, is worried about the proposals Many of the international banks in London have operations in Europe that would be affected by the plans. London's financial centre is also worried the ECB could use its powers to demand regulation that would undermine the city's position as Europe's financial capital. There's opposition on a political level too - the German government says fewer banks should be involved. But the commission wants to push it through with great speed because it wants to reassure the markets. (SOUNDBITE) (English) ALEXANDRIA CARR, FORMER LEGAL ADVISOR TO HM TREASURY, AND OF COUNSEL, MAYER BROWN, SAYING: "What the euro zone wants to do is break this link and allow the ESM to give money directly to the banks but it's said that common supervision, supervisory responsibility and fiscal responsibility are linked so people don't want to pay unless they've got some say over how these banks are managed." The European Central Bank has welcomed the union - all 27 member countries must now agree it before the end of the year. Joanne Nicholson, Reuters

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Deeper union for Europe's banks

Wednesday, September 12, 2012 - 02:41