* Germany ready to accelerate mutual use of banks' fund
* EU deal on scheme for bad banks expected in March
By Martin Santa and John O'Donnell
BRUSSELS, Feb 18 The European Union is
considering ways to ensure that a future euro zone fund to
finance bank closures will always have enough cash, including
the option of halving the time in which the fund would reach its
full size to five years.
Under a deal reached by euro zone governments last December,
the fund, financed by banks, is to reach 55 billion euros over
10 years as euro zone banks pay in 5.5 billion euros annually.
But in this transition period, if a bank were to be closed,
individual euro zone countries could use mainly what their own
banks had paid into the fund's so-called national compartments.
Access to other national compartments would grow only gradually.
This raised concerns at the European Central Bank that such
a scheme might not be robust enough, especially in its early
days. ECB President Mario Draghi called last week for halving
the time by which contributions from all euro zone banks are
fully mutualised to five years.
The chairman of euro zone 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.
"Part of the solution could be to fill the fund up quicker
or to mutualise more quickly. Part of it could be to lend
between compartments and part of it could also be that the fund
will get its own lending facility to go to markets," he said.
During the transition period, borrowing from the markets by
national compartments of the fund would require national
government guarantees, Dijsselbloem told a news conference.
"All of these elements are trying to address the same key
issue, which is: will there, at all times, be enough money in
the fund? And the concern is especially at the beginning, when
the fund has been filled only a little."
German Finance Minister Wolfgang Schaeuble, earlier cool to
the idea of faster mutualisation, said that if funds were to be
shared more quickly, banks would have to fill the fund more
"We are ready to speed up. If 10 years are too long to build
the fund let's speed up. But again not only in the speed of
mutualisation but also in the speed of filling in," Schaeuble
said on Tuesday. "It's quite clear, we must do it in parallel."
This marks a shift in Germany's view from the ministerial
meeting on January 27, when Schaeuble expressed concern about
the idea of faster mutualisation because it "would not be easy"
to make banks contribute the full amount more quickly.
The ECB's idea, however, is different - to allow banks to
contribute the full amount over 10 years as originally planned,
but mutualise all the accumulated funds across the euro zone
already after five years, when the fund is still half full.
The discussions are part of efforts to agree details of a
framework to close failed banks in the euro zone, so that it can
be wrapped up before European Parliament elections in late May.
This 'resolution' scheme is the next step towards a 'banking
union', after supervision of banks by the European Central Bank
starts later this year.
Ultimately, policymakers hope that establishing a banking
union will restore stability to the sector after years of
turmoil, opening the way for credit and lending to flow again.
While finance ministers agreed on the outlines of the
resolution mechanism in December, the framework must be worked
out with the European Parliament. The lawmakers are unhappy
about several aspects of the plan, including the timetable for
pooling national funds raised to help wind down bad banks.