UPDATE 1-Berlin wants bank resolution mechanism open to all of EU
(Adds detail, background)
BERLIN Oct 31 (Reuters) - Europe's resolution mechanism for failing banks should be open to European Union countries outside the euro zone, Germany's Finance Ministry told Reuters on Thursday.
"It is important for the German government that solutions are found not only to formally allow the participation of such member states, but also to do so at fair, comparable conditions," the ministry said in a statement.
To recapitalise banks, the European Stability Mechanism (ESM) is currently able to provide loans only to euro zone governments, as in the case of Spain.
German newspaper Handelsblatt on Thursday cited diplomatic sources in Brussels as saying finance ministers were considering creating a subsidiary of the ESM for bailing out EU banks both inside and outside the euro zone.
But the German finance ministry said the suggestion to create an ESM unit applying also to banks of non-euro zone EU states was "not constructive" and would require changes to the ESM Treaty.
Euro zone states have yet to reach an agreement on the key points of the common resolution mechanism. Only once agreement has been reached does it make sense to discuss advance and intermediate financing, the ministry said.
It suggested financing rescues via a network of national resolution funds at first and said once these had been exhausted, member states should contribute.
Germany has said it wants to reach a common position with its EU partners on a resolution mechanism to wind down failing banks by the end of this year and is working constructively to that end.
(Reporting by Gernot Heller; Writing by Sarah Marsh and Michelle Martin; editing by Stephen Nisbet)
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