EU plans bank backstop for non-euro members
THE European Union (EU) is weighing whether a euro50 billion (RM217 billion) rescue fund can be turned into a bank backstop for member states outside the single-currency bloc, two EU officials said.
The EU’s balance-of-payments fund currently has about euro40 billion available, after being used to help Latvia, Hungary and Romania, the officials said. The European Commission now wants to overhaul the fund and add a tool for bank aid that could be tapped by non-euro countries whose lenders fail next year’s continent-wide stress tests, they said.
The commission, which is based here, wants a resource that can operate alongside the euro area’s euro billion firewall, so that the entire 28-nation EU is braced for the results of next year’s stress tests, the officials said.
The goal is to reach a deal by the end of this year so that the tool can be ready by mid-2014, when the commission also hopes to have finished negotiations on when the firewall can provide direct aid to eurozone banks.
“The commission has proposed that the Balance of Payments Mechanism include a bank recapitalisation instrument for the same reason that one is available for euro-area countries under the European Stability Mechanism — to provide a credible public backstop at the European level capable of reassuring supervisors and market participants that financial stability will be assured,” said Simon O’Connor, a spokesman for the commission
The European Central Bank (ECB) will be conducting balance-sheet reviews of major banks across the euro area as it prepares to take on new oversight duties in the second half of 2014. In addition, all EU banks will face a new round of stress tests, carried out by the ECB, national regulators and the European Banking Authority.
If all the proposed backstops are in place, the EU would have as much as euro 00 billion available to handle banking problems. Bloomberg