George Osborne faces being forced to set aside up to £9 billion for a stand-alone bank crisis fund, as the UK chancellor is once again cornered in Brussels over a flagship EU financial reform.
EU Member States are approaching the final stages of talks on national rules to wind up troubled banks, with Britain isolated in opposing the creation of mandatory, pre-financed national funds to pay for bank resolution costs. The latest compromise under discussion in Brussels, seen by the Financial Times, would require Mr Osborne to tap industry for a resolution and deposit insurance fund matching at least 1 per cent of covered deposits.
The dispute over the fund will add to Britain’s long list of troubles in Brussels on financial regulation and comes on the heels of its defeat over bank bonuses, which saw Mr Osborne overruled by his counterparts.
London is facing headwinds: Germany and natural UK allies such as Sweden agree with the principle of establishing national resolution funds, or already have them in place. “The Brits are alone and no one is running to help”, said a diplomat involved.
The fund is one element of a wider European Commission overhaul of bank governance, which establishes resolution authorities with summary powers to writedown creditors in failed banks, so the burden largely falls on private investors rather than taxpayers. Ambassadors discuss the reforms on Thursday.
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