October 22, 2012
At their summit, European leaders called for a completion of the legal framework for an EU banking union by end-2012 and for operational implementation “in the course of 2013”. This is a formal compromise that merely papers over differences of opinion amongst member states. On the positive side, it is to be welcomed that the Council realised the original timetable was too ambitious. Also positive: EU leaders rightly emphasise the importance of a single rule book, quality of supervision and the need to maintain the Single Market. On the negative side, the summit conclusions confirm the central role for the ECB – without answering how related legal obstacles and political concerns shall be resolved. What’s more: the leaders make it clear that they have no intention whatsoever to be bolder on joint crisis resolution and corresponding financing mechanisms. Hence, banking union will remain a torso. The compromise is just enough to allow – once EU-level supervision is established – direct recaps with ESM money, but is not even remotely close to what a consistent supervisory system would look like that provided greater financial stability and broke the sovereign-bank nexus decisively.
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