The International Monetary Fund’s head has requested that the process of creating a European banking union be sped up, after several months of deliberation.
Addressing an audience at a recent Paris conference, the International Monetary Fund’s current chief said the European banking union area was a “beautiful ship”, but that it was quite unprepared for the rough waters ahead of it.
“We very much think of the euro area as a beautiful ship that has been built, nurtured… for the soft seas, but which is not yet completely finished for the rough ones. A lot has been done in relation to banking union. If I have a message today, it is that that particular part of the ship needs to be finished, needs to be completed and speed is of the essence,” CEO Christine Lagarde said.
The formulation of a European banking union has been put into motion to try and avoid the global banking crisis from happening again.
The union could possible involve a single banking supervisor, with a pool of national funds kept to save banks at risk. The union will be a governing authority as suggested by the European Commission, which detailed plans for a new body to be accountable for handling Eurozone banks in financial difficulty.
The new governing body would have the power to restructure or entirely shut down any banks in difficulty, regardless of the authorities’ decisions in the bank’s country of origin. It would be billed as a Single Resolution Mechanism, with dedicated fund to save banks created from levies on existing financial institutions.
The proposals have caused some tension, with the possibility of taxpayer money from individual European Union states necessary to keep the €55 billion fund at an optimum level. This has obviously inspired some concern from individual states about the impact on their citizens.
Another objection is that current European treaties may have to be revised to reflect the new financial governing body. Germany has expressed some reservations in this department, stating that these changes may in fact take months, perhaps years, to agree upon and confirm.
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