The European Parliament approved on April 15 the creation of a new authority and a fund for failing banks. Legislators managed to reach agreement about the missing elements of this so-called banking union which aims to prevent public cost of future financial crises. Elisa Ferreira, member of the European Socialists and Democrats at the European Parliament, explained to Euranet Plus how the ?Single Resolution Mechanism? will protect taxpayers.
This new system will ensure that taxpayers won?t have to pay for the bad decisions of bankers again, said the Portuguese socialist in charge of the report on Single Resolution Mechanism (SRM). It will also oblige the EU countries to guarantee that savings up to 100,000 euros would be fully protected from any loss.
The SRM will concretely start at the end of this year, which means that the European banks from the eurozone member states will be supervised directly by the European Central Bank. Ferreira explained how the bigger and smaller banks would be controlled through this new system:
This fund for failing banks was a missing element of the banking union. Legislators agreed on the creation of a 55 billion euros fund financed by the banks themselves. The guaranteed amount will be available faster. This means that repayment deadlines will be gradually reduced from 20 to 7 days in 2024.
European financial markets commissioner Michel Barnier said: ?We now have in place a true European system to supervise the Eurozone banks and deal with any future failures.? However, during the press conference, many journalists raised concerns that this amount would be insufficient to deal with big banks if they get into trouble.
Banking Union: Example of a co-legislation procedure
The long negotiations about the banking unions showed how co-legislation works. A quite difficult political procedure where the European Council and the European Parliament are at the same level and are dealing together. This is why negotiations took a very long time, as stressed Elisa Ferreira:
From now, the 28 EU Member states have two years to make this legislation national laws.