Brussels: The new EU banking union should not be slowed down by member state negotiations, the European financial services commissioner has argued in a major newspaper interview, despite what a senior industry figure tells Delano are “huge unresolved problems.”
Notwithstanding the political battles over the details, the current timetable for a single EU banking authority is achievable and the agency should set caps on bankers’ bonuses, Michel Barnier, France’s European commissioner, told the Financial Times in an interview published in Monday’s edition. In response, the head of Luxembourg’s banking association said the timeline is unrealistic.
In October European ministers agreed to set-up a common banking regulator for the more than 6,000 banks in the euro zone, which will operate under the auspices of the European Central Bank in Frankfurt. However, euro leaders have yet to agree to the organisations’ charter.
This week Barnier (photo) argued for reaching the December deadline, set earlier this year, saying “we need a political decision and that is possible”. The FT quotes him as saying: “There is no obstacle that is insurmountable today. There is no decision that cannot be taken before the end of the year--if there is a political will.”
While originally Barnier had wanted the regulator to begin operations on January 1 of next year, “that deadline is certainly not possible anymore,” Jean-Jacques Rommes, head of the Luxembourg banking trade group ABBL, told Delano on Monday.
If the new single regulator is to begin operations in 2014, the latest target date publically mooted, “Mr. Barnier must have a decision rather quickly,” Rommes reckons. “I am not so optimistic. There are still huge unresolved problems. One of the biggest is the relationship between those that are in the euro zone and those outside. The 27 would have to share a common rulebook with only one supervisor for the 17 and those countries who would join [the euro area]. To make that work I think is immensely complicated,” Rommes said.
Elsewhere in its article, the FT said that Barnier opposed “British demands for safeguards to stop the ECB dominating at the European Banking Authority, the agency where supervisors co-ordinate EU technical rules. Although some changes must be made, he is unconvinced by UK demands for there to be a minimum of non-banking union votes in any decision--a so-called ‘double majority’.”
Here the commissioner finds common ground with the Grand Duchy’s banking community. “The British are not terribly helpful on the matter,” Rommes commented. “They find it unfair that other countries would unite and express the same opinion in one authority. You cannot say it’s your right that the others are not united.”
Finally, in his interview Barnier called for a “maximum ceiling” on bankers’ bonuses relative to fixed pay, with the FT quoting him as saying: “Banks need to pay attention. They are part of society, they are not outside of society,” he said. “Bonuses and remuneration are absolutely incomprehensible for people.”
“It may be the wrong idea to pay millions of euro in bonuses, I don’t say the contrary,” Rommes told Delano. “Luxembourg has never been the country of huge bonuses. We are not so afraid of [not being able to pay] huge bonuses, because we don’t pay huge bonuses.” Rather Rommes fears “an administrative nightmare.”
“The European Commission is not known for taking paperwork away. Once they’re on a subject, it never gets easier for us in the end.”