Faith in the euro currency sinks further as states grapple with bank issues

Faith in the euro currency is once again being tested as member states grapple with legislation for EU bank failure support mechanisms and the EU is again under pressure to show they are tackling Europe’s banking and public debt problems.

EU Bank Crisis?

Europe needs an open and comprehensive review of its banks if it is to persuade investors and taxpayers that its financial industry is on the mend, after previous assessments missed problems in countries such as Ireland, Spain and Cyprus.

“We will need a better starting point,” Piers Haben, a senior official at the European Banking Authority (EBA), told an audience of several hundred bankers at the Institute of International Finance’s spring meeting in Paris on Tuesday.

EU Bank Failure Talks

Talks on new banking resolution and recovering directive, a key strand of banking union that will dictate how banks will be wound-down in future finished without agreement last Saturday morning in Luxembourg, prompting Minister for Finance Michael Noonan to call a second meeting for today.

Sharp differences have emerged over how much the home country and creditors would have to contribute to the winding up of a problem bank and the degree of flexibility allowed.

Some countries such as Germany favoured a tight regime, ‘bailing-in’ the bank’s creditors so that they and not the taxpayer would bear most of the costs.

Other member states such as France want more leeway so that some classes of creditors could be excluded if by including them, they were weakened and so set up a potential knock on effort through the economy.

Finance ministers from the bloc’s 27 countries will gather later today for more talks on the subject with a view to finding some common ground and agreement for possible EU bank failure solutions.

The European Union spent the equivalent of a third of its economic output on saving European banks between 2008 and 2011, using taxpayer cash but are still struggling to contain the ongoing financial crisis.

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Faith in the euro currency sinks further as states grapple with bank issues