including through the provision of a public backstop,” Mario Draghi said on Friday. “These arrangements must be in place before we conclude our assessment,” he said. But the ministers’ talks face an additional hindrance because Germany’s finance minister, Wolfgang Schaeuble, is not expected to attend the two-day Luxembourg meeting. Germany, Europe’s biggest economy, in talks to form a new government. During the region’s debt turmoil, the European Union conducted two bank stress tests, considered flops for blunders such as giving a clean bill of health to Irish banks months before they pushed the country to the brink of bankruptcy. The ECB’s new checks are seen as the last chance to come clean for the euro zone as the bloc tries to set up a single banking framework, known as banking union. The debate opens amid ebbing political enthusiasm for banking union – originally planned as a three-stage process involving ECB bank supervision, alongside an agency to shut failing banks and a system of deposit guarantees. It would be the boldest step in European integration since the crisis. “We have to find a solution now,” said Michel Barnier, the EU Commissioner in charge of financial regulation, urging faster progress in the slow talks. “The next financial crisis is not going to wait for us.” ANGLO-GERMAN AXIS? In one sign of the divisions, Britain has repeatedly refused to sign off on the first pillar of the banking union framework, allowing the ECB monitor banks.
Europe prepares to come clean on hidden bank losses
Credit: Reuters/Francois Lenoir LUXEMBOURG | Tue Oct 15, 2013 9:46am EDT LUXEMBOURG (Reuters) – Spain will probably bring an end to the programme of international aid for its banks on schedule this year, Economy Minister Luis de Guindos told a news conference in Luxembourg on Tuesday. Madrid turned to Europe last year for 41 billion euros ($56 billion) to help the weakest of its banks, which have been crippled by the collapse of its real estate market and resulting mass of failed loans to developers and houseowners. With the economic fortunes of Europe’s debt-ridden southern half showing signs of improving, a senior official in Brussels told Reuters last week that Spain was unlikely to seek more financial aid for the banks when the current programme runs out. “The central scenario, and the most probable one, is that on November 15 (it will be decided that) Spain’s banking programme will come to a close,” de Guindos told reporters at a meeting of European Union finance ministers. The European Central Bank and the European Commission, which backed the rescue, last month said in a review of Spanish banking reforms that the sector remained comfortably solvent, and praised its turnaround. They stressed, however, that Spain’s weak economy – set to emerge from a two-year recession by the end of the year – and a fall-off in lending still posed a risk. Like their European peers, Spanish banks also face a European review of their balance sheets early next year before the ECB takes over as supervisor. Some believe their restructured or refinanced loans could come under particular scrutiny, and that they could be told to put more cash aside to counter potential losses on these, banking sources in Madrid have said. Any capital gap that that process leaves is likely to be manageable, though smaller banks that are owned by the state are unlikely to be able to turn to the market like some of their peers. The Spanish government currently estimates that lenders will have to put aside an extra 5 billion euros in provisions to counter such losses, a source at the Economy Ministry said. “The general perception is that in Europe the banking system has not been as thoroughly cleaned up as in the United States … which is among the elements holding back economic growth in Europe,” de Guindos told the news conference, in reference to the European review of banks’ books. (Reporting by Robin Emmott and Martin Santa in Luxembourg, Sonya Dowsett, Jose Elias Rodriguez and Jesus Aguado in Madrid; Writing by Sarah White; editing by Patrick Graham) Tweet this