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EU unveils plans for failing banks

Wednesday, July 10, 2013 - 02:06

July 10 - Another step towards banking union - a key to resolving the euro zone crisis - has been made with a European Commission proposal to create an agency to salvage or shut failed banks. But as Ivor Bennett reports it's not likely to be operating any time soon and there are still many hurdles ahead.

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What to do with Europe's troubled banks? It's a question that's plagued many a late-night summit. But now it seems the bloc finally has an answer - at least a blueprint for one. The European Commission has unveiled plans for a new agency that'll tackle the problem. EU Commissioner Michel Barnier. (SOUNDBITE) (French) EU INTERNAL MARKET COMMISSIONER MICHEL BARNIER SAYING: "We are going to equip ourselves with the means to predict together, to supervise together and together resolve a bank -- where necessary -- promptly. Ladies and gentlemen, I have frequently expressed my long held conviction that prevention is always cheaper than repair." But failures aren't out of the question - the near-collapse of Franco-Belgian bank Dexia a reminder of the chaos that can ensue in cross-border failings. Along with the ECB, the new agency will clear up any mess - either revamping a bank or shutting it down. But without any backstop fund, the question is: who will pay? (SOUNDBITE) (French) EU INTERNAL MARKET COMMISSIONER MICHEL BARNIER SAYING: "I'm not ruling out and nobody can rule out that in a resolution, at the end of the process, when we've triggered the bail-in, there might be a need, notably during the transition period, for public money." A safety net was scrapped in the face of German opposition - they're afraid they'd be the ones footing the bill. The plan now is to tap banks to build a war chest of up to 70 billion euros. But that could take as long as a decade, prompting fears the agency will struggle to do its job. ETX Capital's Mark Priest says the plans have more style than substance. SOUNDBITE (English) MARK PRIEST, SENIOR TRADER, ETX CAPITAL, SAYING: "It's there to be seen to allay the fears of other countries that if there is another failed bank, how will the markets react? How will the countries react? And it's kind of there as a hope that we won't see another failed bank I think, that's kind of the key." If agreed on by the bloc's member states, the agency will be up and running in 2015. But it may take a lot longer than that before there's any money to back it up.

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EU unveils plans for failing banks

Wednesday, July 10, 2013 - 02:06