The European Union has completed another major step toward creating a banking union on Thursday, setting up measures to stabilise the financial system and make it easier to deal with troubled banks.
After all-night negotiations, EU member states and the parliament broke a deadlock on how to set up a joint authority that can restructure or shut down failing banks.
The authority would be part of the broader banking union, a system of new institutions and rules that aims to make sure a bank failure does not overwhelm an individual country’s public finances, threatening the wider region’s stability.
“This will strengthen confidence and stability in the financial markets and help restore lending to the economy,” said EU Commission president Jose Manuel Barroso.
Corien Wortmann-Kool, a lead negotiator for the parliament, said that under the new rules troubled banks could be dealt with “within a weekend” instead of the protracted process before that often undermined credibility in the EU’s financial system.
Negotiators had insisted on reaching a deal before the European elections in May, fearing that otherwise everything would have to be renegotiated once the new legislature is in place.
The 28 member states still have to officially approve the deal, but after Thursday’s breakthrough that should be little more than a formality. The full legislature should back it at its April session, the last before the elections.
“I’m delighted we have delivered,” said Mr Barroso.
Since the financial crisis, the EU has focused on protecting taxpayers from having to pay for expensive bank bailouts.
Once the system is in place, “no European taxpayer will ever have to pay for bankers’ bad decisions again”, said Hannes Swoboda, the leader of the parliament’s socialist group.