21 February 2014

German banks say faster build-up of eurozone bank fund 'unacceptable'

As agreed so far, the fund would total €55 billion over 10 years. But EU officials are worried that might not be enough, and have asked that the deadlines for payment and full mutualisation of contributions be halved, Reuters reported. The chairman of eurozone finance ministers, Jeroen Dijsselbloem, said on Tuesday the ministers were discussing several ways of ensuring the fund would always have enough cash and that he expected a compromise deal in March. Schäuble, initially not keen on the idea of faster mutualisation, has said that if funds were to be shared more quickly, banks would have to fill the fund more quickly too.

The letter, dated 5 February, was seen by Reuters and Bloomberg and also sent to the European Commission and MEPs, reports the Tiroler Tageszeitung. In the document, the banking groups said they were "greatly concerned" about proposals to speed up the process. "The resulting doubling of annual payments would increase the strain on contributing banks to a level no longer acceptable", the letter said, referring also to other regulatory costs banks will have to meet in future.

As reported by Welt, in the course of the negotiations with the EP, ECB President Mario Draghi urged that the proposal for a single resolution fund be reconsidered and improved because the planned 10-year construction period was "obviously too long". The Irish Times reported earlier that Draghi was also backing a five-year timeframe.

The German banking industry is united and speaks up against this advance of the European Central Bank. An acceleration of the process from 10 to five years would mean a "doubling" of the annual burden for the German institutions, that have to bear the lion's share with 25 per cent of the planned funds. Equally, the banking industry rejected the plans of early pooling of the national contributions in the Resolution Fund. Outstanding debt of non-German banks could thus be shifted to a European level, which should be "urgently excluded".

The letter was signed by the professional associations of German cooperative banks, public banks, savings banks, private commercial banks and specialist Pfandbrief banks.