EU Finance Ministers In Banking Accord

European Union leaders are set to meet on Thursday in a Brussels summit meeting and are likely to approve an agreement for a Eurozone banking union which has been thrashed out by their finance ministers.

The deal that the Finance ministers have reached after months of often difficult discussion is aimed at ensuring that larger banks behave prudently in the wake of the Eurozone crisis and the banking excesses which led to the global financial crisis in the first place. It is hoped that the banking union will help to strengthen confidence in the Euro. The accord will see the European Central Bank act as the chief supervisor of banks within the 17 member bloc. The agreement will be in force in 2014 and places banks that have assets above the €30 billion mark under the supervision of the ECB.

The ECB will be granted the powers to close down any bank which fails to follow the rules that have been laid down and affords it the opportunity to provide Eurozone rescue funds to a bank in financial difficulty. The agreement has been framed such that it can be implemented without any treaties needing to be renegotiated.

Denmark and the UK both have formal opt-outs for membership of the Euro whereas the remaining eight non-Eurozone members have undertaken to join the currency at some future date. The UK is keen to ensure that London remains the central financial hub of Europe, so ultimately, it is likely to join the Euro when political and economic factors permit (a long way off) to ensure that the City maintains its key role in an ever more integrated Eurozone. In the light of scandals engulfing a number of Europe’s most respected banks, any move that shores up confidence in the sector is a good thing and it may be that banks will be forced to greater transparency in the future.