Europe deadlocks on bank supervisor

Spain’s minister warns delay will unsettle markets

Spain’s economy minister, Luis de Guindos Jurado (left) conferred with Germany’s finance minister, Wolfgang Schauble.
Yves Logghe/Associated Press
Spain’s economy minister, Luis de Guindos Jurado (left) conferred with Germany’s finance minister, Wolfgang Schauble.

BRUSSELS — European Union finance ministers were deadlocked Tuesday over how to create a single banking supervisor for the eurozone, a new system that is supposed to prevent financial crises.

The ministers agreed to reconvene next week, a day ahead of a summit of EU leaders, who had been hoping to focus on the design of a banking union — something they agreed on last summer as a way to safeguard the industry after member countries racked up enormous debts bailing out banks.

An agreement in June called for a single regulator under the European Central Bank. The bloc’s administrative arm, the European Commission, has proposed phasing in the system beginning Jan. 1.


But the deadlock indicated sharp disagreement over how many banks in the euro currency union should be covered; how to ensure countries outside the currency union have a way to rebuff regulations they dislike; and how to ensure the central bank would keep monetary policy separate from bank supervision.

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If ministers fail to reach agreement Dec. 12, EU leaders will arrive at their summit the following day without a cornerstone in place for the banking union. One of the goals for the union could eventually be to issue debt backed by eurozone countries, as a way to buffer the sort of interest-rate spikes that have bedeviled weaker countries, including Spain.

Some ministers warned that further delays could lead to a return of acute financial pressures in the eurozone.

“If we are not able to deliver in the dates we have committed, this will not be neutral in terms of the stability of the markets,’’ said Luis de Guindos, Spain’s economy minister.

For Spain, stricter supervision was supposed to be the condition for using European funds to bail out its troubled banks directly and a way to avoid accumulating more sovereign debt. Once the supervisor is in place, Spain wants the money it is drawing for its bailout to be moved off its ledgers.


France and Germany remained divided over new banking rules. That is a significant obstacle, because agreement between the two countries usually is needed to accomplish major changes in Europe.

Pierre Moscovici, France’s finance­ minister, said new rules should apply to all lenders, not lead to a two-tier system.

Chancellor Angela Merkel of Germany has suggested the system could eventually apply to all 6,000 banks in the eurozone. But some German officials and industry groups would rather have the new centralized oversight apply only to the biggest banks, leaving regulation of smaller savings banks in the hands of national officials.

French officials have stressed the need for a system that covers all eurozone banks. Otherwise, the French have warned, any sudden intervention by the ECB could raise alarm among investors and depositors and lead to bank runs.

But Wolfgang Schauble, the German finance minister, said trying to give too much central authority to a new banking regulator would meet stiff political opposition in his country.


‘‘Nobody believes that any European institution will be capable to supervise 6,000 banks in Europe,’’ he said.

German state governments also have balked at giving the central bank oversight of the hundreds of small and mid-size savings banks that do much of the lending to consumers and small businesses.

Germany also refused to support a British demand: rules to ensure lenders in London are regulated by Britain.

Yet another concern was whether so much supervisory power could lead the central bank to compromise decisions on monetary policy — if, for example, it were setting interest rates while trying to oversee sensitive issues like bailouts.