Connect with us

Hi, what are you looking for?

Capital Business
Capital Business
Finance ministers of France, Pierre Moscovici (R), Netherlands, Jeroen Dijsselbloem (L), Sweden, Anders Borg © AFP

World

EU finance minister talks break down

Finance ministers of France, Pierre Moscovici (R), Netherlands, Jeroen Dijsselbloem (L), Sweden, Anders Borg © AFP

Finance ministers of France, Pierre Moscovici (R), Netherlands, Jeroen Dijsselbloem (L), Sweden, Anders Borg © AFP

LUXEMBOURG, Jun 22 – European Union finance ministers failed early Saturday to reach an agreement on how to close down failing banks before they can do too much damage to the wider economy.

This resolution mechanism would have marked another important step toward a ‘banking union,’ the new overall EU regulatory framework meant to restore the banking sector to health and so prevent any repeat of the bloc’s debt crisis.

“We ran out of time … it is a very complex issue,” said Irish Finance Minister Michael Noonan, who chaired the meeting.

“We made significant progress and differences were narrowed … but core issues were still to be resolved,” Noonan added after marathon talks which broke up in the small hours of Saturday.

The 27 EU ministers will meet again Wednesday to try and finalise an accord before an EU leaders summit on Thursday and Friday, he added.

After 18 hours of talks, the main sticking points were over how much the home country and creditors would have to contribute to the cost of winding up a problem bank.

Noonan said some non-euro states naturally wanted more flexibility because they did not have access to rescue funding from the European Stability Mechanism, the eurozone’s backstop.

At the same time, some eurozone states also wanted more leeway, among them France while Germany favoured a much tighter regime, EU sources said.

France and Britain argue that rather than simply making all creditors pay their share, they should have discretion over who to include.

A large company that is ‘bailed-in’ because of its exposure to a failed bank might be weakened as a result and this could have a harmful knock-on effect on the economy.

Advertisement. Scroll to continue reading.

Initially, the “talks introduced more flexibility but as they went on, that went too far for some,” one EU source said as the talks broke up.

Hopes had been high that ministers would reach a deal to compliment a eurozone accord Thursday on how the ESM could inject funds into banks needing fresh capital but without adding to the already huge debt burden of member states.

The two instruments were combined in the Banking Recovery and Resolution Directive (BRRD) that ministers discussed.

Asked if the failure Saturday to agree the resolution instrument invalidated Thursday’s accord, Noonan stressed that it did not.

“They are two entirely separate files,” he said.

French Finance Minister Pierre Moscovici said he felt “ninety percent of the work had been done,” and highlighted Thursday’s ESM deal on direct bank recapitalisation.

The ESM accord goes “hand in hand” with the resolution regime as a key part of the banking union, Moscovici said.

“I have no doubt but that we will reach an agreement and that this directive will see the light of day,” he added.

Advertisement. Scroll to continue reading.
Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...