Dec.19 - EU leaders, gathering in Brussels for their final summit of the year, applaud Europe's new agreement on banking union. Investors aren't so sure about whether it's enough. Ciara Sutton reports.
▲ Hide Transcript
▶ View Transcript
TV AND WEB RESTRICTIONS~****~
More than five years since financial crisis struck, Europe is on the verge of finalising one its most ambitious reforms since the launch of the euro - an agency and fund to shut problem banks.
European leaders will now sign off on the blueprint before final touches are made with the European Parliament next year.
The EU wants to prevent a repeat of the turmoil when failing banks in countries from Ireland to Cyprus brought their states to the brink of bankruptcy.
(SOUNDBITE) (German) GERMAN FINANCE MINISTER, WOLFGANG SCHAEUBLE, SAYING:
"The world is a lot less risky a place than it was in 2008."
But some feel the deal stopped short of a plan for the euro zone to unite in tackling its troubled lenders.
Robert Halver is a trader at Baader Bank.
(SOUNDBITE) (German) TRADER AT BAADER BANK, ROBERT HALVER, SAYING:
"I have to say very clearly, there are big question marks. A 55 billion (euro) rescue fund for winding up bankrupt banks won't be enough. That means the taxpayer will end up paying."
Under the plan, the ECB will fire the starting shot by declaring a bank too weak to survive.
After that there will be input from a new agency empowered to shut banks, the European Commission and up to 18 different euro zone countries.
Critics say the process could be cumbersome.
Chief Currency Strategist at BNY Mellon, Simon Derrick.
(SOUNDBITE) (English) CHIEF CURRENCY STRATEGIST AT BNY MELLON, SIMON DERRICK, SAYING:
"The key here though is that there was a huge decision made last year when the euro zone finally decided that they were going to keep Greece in and keep everybody else in. So if they're going to continue with the current members, there has to be fiscal union. And of course that means you have to go down the route to banking union. So there's no question that it's going to happen, but as always with Europe, it's about the political compromises that take place."
Central elements of the banking union still need to be resolved.
Germany is standing firm against the use of euro zone money to back troubled banks and insists no money from the 500-billion-euro European Stability Mechanism fund should be available to clean-up banks.
Euro zone ministers have agreed that banks will pay into funds for the closure of failed lenders, raising roughly 55 billion euros over 10 years.
Completing a banking union is central to keeping the euro safe in the long term, but remains as much about political integration as it does economic.
Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code