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What powers will the supervisor have?According to the proposal, the eurozone central bank will "have direct oversight of eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities". The ECB, in its new role as supervisor, will monitor the health of banks within the eurozone (but not the UK), and be able to intervene when a bank is in trouble. Countries such as the UK and Sweden, outside the euro area, can enter into "close co-operation arrangements" with the ECB if they choose to. A compromise agreement was reached giving the ECB direct oversight of banks with assets greater than 30bn euros ($39bn; £24bn). Under the compromise, the ECB will oversee banks representing more than a fifth of a state's GDP.
How will the "common resolution framework" work? If a eurozone bank got into trouble, the process of rescuing it - or, in the worst case, putting it through a kind of bankruptcy procedure - would be carried out by a pan-European "resolution authority" - potentially the ECB, or an agency reporting to it. As part of any rescue, the eurozone governments would require the bank's existing shareholders and lenders to take a lot of the losses. All eurozone banks would also be required to contribute annually to a common fund that could be used to absorb the cost of a bailout - and therefore reduce the cost to taxpayers. To the extent that taxpayer money is also needed to absorb losses, or has to be put at risk by buying new shares in a troubled bank in order to provide it with more capital, then this would be provided by the eurozone governments collectively, irrespective of which country the bank is based in. This taxpayer money is expected to be provided by the eurozone's recently inaugurated permanent bailout fund - the European Stability Mechanism.1
How will the common deposit guarantee fund work? Currently each eurozone country operates its own national deposit guarantee scheme. During the crisis, all EU countries agreed to raise the amount of each deposit that they guarantee to 100,000 euros.
The summit discussion paper - talks about a "harmonisation" of these national schemes, which presumably involves setting the same rules in each country for who gets guaranteed how much and when, and what the banks in each country must contribute to the scheme. It is unclear if, and how much, these national schemes will then be guaranteed by all of the eurozone's governments collectively.
______________________ 1. See p. 38 When will all this happen? The eurozone governments want to have the legal framework for the common banking supervisor in place by 1 January 2013. The ECB will then have up to 12 months to put in place its new supervisory department, and take over active duties by 1 January 2014. Some kind of common resolution arrangement should also be in place by then, backed by the eurozone's bailout fund. In order to keep to this schedule, the legal framework will need to be designed in a way that avoids the need for a change to existing European treaties. A treaty change would open a whole new can of worms - it would need to be negotiated with all the EU governments, including the UK. And it would then need to be ratified by all of the EU parliaments. In the long run, however, a treaty change looks unavoidable if the ECB is to be given adequate authority, and if the resolution framework and deposit guarantee scheme are to be given enough financial backing to see off a future financial crisis. However, it seems likely that Germany would delay this until much greater integration has been achieved in other areas - including economic policy and government spending rules.
I. Vocabulary: eurozone’s banking union – банковский союз стран еврозоны common banking supervisor – общий орган банковского надзора single supervisory mechanism – единый надзорный механизм common resolution framework - общий механизм урегулирования common resolution authority – общий орган урегулирования common deposit guarantee – общая гарантия банковских вкладов common eurozone fund – общий фонд стран еврозоны powers – полномочия have direct oversight of eurozone banks – осуществлять прямой надзор за банками еврозоны national supervisory authorities – национальные надзорные органы monitor – осуществлять контроль intervene – вмешиваться get into trouble – попасть в беду reach a compromise agreement – достичь компромиссного соглашения bank assets – банковские активы rescue a bank – спасти банк put a bank through bankruptcy – обанкротить банк report to – быть подотчетным take losses – понести убытки contribute annually to a common fund – вносить средства ежегодно в общий фонд
absorb the cost of a bailout – взять на себя стоимость финансовой помощи taxpayers – налогоплательщики permanent bailout fund – постоянный фонд помощи operate national deposit guarantee schemes – задействовать национальные схемы гарантии вкладов harmonisation – унификация legal framework – нормативная база open a new can of worms – создать кучу неприятностей ratify a treaty – ратифицировать договор to be given adequate authority – предоставлять достаточные полномочия
II. Answer the following questions using as many vocabulary items as possible: 1) What is the eurozone banking union? 2) What powers will the supervisor have? 3) How will “the common resolution framework” work? 4) How will the common deposit guarantee fund work? 5) When will all this happen?
III. Give a short talk on the proposed eurozone’s banking union. BANK STRESS TESTS Tests designed to measure the health of 19 of the biggest US banks have revealed that 10 need a combined $74.6 bn (£50bn) of extra funds to boost their reserves.
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