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Europe divided on banking reform
Europe faces weeks of tough negotiations to agree on a new region-wide banking supervisor after divisions emerged over the new body’s powers at a meeting of the region’s finance ministers yesterday. The design of the new supervisory framework is widely considered to be a key part of Europe’s attempts to strengthen its financial system and help bring an end to the three-year debt crisis.
On the second day of meetings in the Cyprus capital, finance ministers from all 27 members of the European Union pored over proposals unveiled earlier this week by the European Commission, the EU’s executive branch. The Commission wants the European Central Bank to be given the role of supervisor and be granted sweeping new powers—from the ability to grant and take away banking licenses to extensive authority to investigate and fine wayward banks.
Many Europe-watchers and politicians have called for a “banking union”—a unified playbook for all the region’s banks—to help forge a tighter EU and solve the debt crisis hitting the 17 countries that use the euro. The creation of a single bank supervisor is an important part of this plan and has to be in place before other measures can be considered. These include a European-wide system of depositors’ insurance; a single method for winding down bankrupt banks; and allowing the European bailout fund to directly help banks in trouble, instead of lending money only to governments.
All 27 EU countries have to agree on the new framework though it will only apply to the 17-nation eurozone at first. The remaining ten countries in the EU can join if they wish, but they won’t have voting rights at the ECB because they are not members of the euro.
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