EU to propose Banking Union Plan in due course

The most recent EU Summit held in June 2012 saw the creation of a tentative action aimed at addressing the current problems with bad banks and grossly indebted governments. This is currently being called the “Banking Union Plan”. The essential element of this plan is the institution of a single European banking supervisor, a common EU deposit-guarantee scheme as well as a single bank-resolution fund aimed at facilitating the winding down of bad banks in Spain.

The official summit report suggested that the existing “European Banking Authority” will lose control over the euro-zone states and that these would then be remitted to the supervision of the European banking supervisor. Furthermore, this new institution would be an agent of the European Central Bank. This will allow the “European Stability Mechanism”, the permanent rescue of the EU, to recapitalise banks directly.

Details for the Banking Union Plan are being discussed by the European Commission and the European Central Bank. The EU executive is in the process of refining the new plan in Autumn with a view to having it approved in the middle of December and subsequently brought into force in January of 2013.