June 11, 2018 / 10:29 AM / 4 months ago

Eurogroup chief sees draft deal on bank fund backstop by end-June

LISBON (Reuters) - Euro zone finance ministers should agree in principle on a backstop for the EU’s bank rescue fund in time for a summit at the end of June, their chairman Mario Centeno said on Monday.

French Finance Minister Bruno Le Maire and Portugal's Finance Minister and Eurogroup President Mario Centeno attend a EU finance ministers meeting in Brussels, Belgium, May 25, 2018. REUTERS/Yves Herman

He said the idea to expand the role of the euro zone’s bailout fund known as the European Stability Mechanism, making it also a common backstop for the Single Resolution Fund for banks, had now wide-ranging support within his Eurogroup.

The EU’s bank-financed rescue fund for failing lenders was set up as part of a banking union plan during the financial crisis, but it still does not have enough cash to cope with a large banking crisis, meaning it would require a safety net.

The backstop issue, along with a common insurance scheme for European depositors, had long blocked the completion of the banking union, but a recent about-turn in Europe’s powerhouse Germany in support of a backstop has opened the way for a deal.

Speaking at a conference in Lisbon, Centeno said “only some details need to be fine-tuned in the negotiations such as the decision process in using the backstop and its introduction date, which could be before 2024”.

“But I expect that at the end of the month we could have an agreement in principle. It will be just a step, but it will change the way investors evaluate the risk of a banking crisis,” said Centeno, who is also Portugal’s finance minister.

He also expected the June 28-29 European Council meeting to advance reforms of the bailout fund, which should provide it with more powers and instruments, such as a euro zone budget for investment and stabilization, as well as crisis-management and crisis-prevention roles.

Reporting By Andrei Khalip and Sergio Goncalves; Editing by Toby Chopra

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