No less a luminary than George Soros was suggesting that the Euro crisis requires banking reforms to be instigated before a credible, stable currency can emerge. He also suggested that political leaders had failed to grasp the fundamental nature of the problem.
Perhaps the EU has been listening to the billionaire currency speculator because they have just announced plans to establish a single regulating body to oversee the banking sector across all 27 EU Member States. The move could happen as early as next year – if there were to be no objections to the plan which is highly unlikely.
One reason why the initiative will not have a smooth passage is that the EU plans to fund it via a tax on financial institutions across the EU. Given that the UK government is implacably against an EU tax on financial transactions since they fear this will harm London’s role as one of the world’s financial hubs, it is unlikely that they would have no objection to taxing financial institutions. Indeed, the UK has already signalled that such a move should only extend to the Eurozone
On the positive side, the scheme comes with an EU-wide deposit guarantee scheme which would be designed to protect (individual) savers in the event of a further collapse.
European Commission President Jose Manuel Barroso is in favour of elements of the plan, such as common bank supervision, being introduced as rapidly as possible, as early as January 2013 which is immediately in political terms. Certain aspects of the reforms could be rapidly implemented, but others would require treaties to be renegotiated and, in principle, may need to be put to referenda in some Member States. It has been suggested that the reforms should be linked to the fiscal union moves that gained widespread support late last year, but this may bring with it its own set of problems.