Reuters: Regulatory News: WRAPUP 1-Eastern EU members attack bank plan

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WRAPUP 1-Eastern EU members attack bank plan Jun 27th 2012, 16:49 Wed Jun 27, 2012 12:49pm EDT * Czech government says banking union plan could damage economy * Bulgarian central bank says union should only be for euro states * Officials add to discord ahead of Thursday/Friday EU summit By Michael Winfrey and Robert Muller PRAGUE, June 27 (Reuters) - The Czech government and Bulgarian central bank stepped up criticism of proposals for an EU banking union on Wednesday, raising new obstacles to agreement at a summit this week. Changes to EU banking supervision are seen as important for resolving the euro zone debt crisis and are up for discussion at a summit that is already set to be heated as Germany faces off with Italy, France and Spain over how to save the currency bloc. Some states outside the euro zone, including economic heavyweight Britain, fear EU-wide banking rules could rob them of sovereignty and damage their economies. Czech Prime Minister Petr Necas said his government would not accept initial proposals circulated so far. "Some proposals like the banking union could have an extremely damaging impact on the Czech economy," he said, adding that he did not expect any major conclusion from the summit. Bulgarian central bank governor Ivan Iskrov expressed concern over any proposal to extend banking supervision across the European Union, rather than just to the euro zone, and said small states would find that hard to support. A failure by all EU members to agree on EU bank regulation would undermine prospects for any changes which could in any case take years to implement. The particular worry of the Czech Republic and some other eastern European countries is that their banking systems could be undermined by lighter EU-wide regulation. Many banks in eastern European countries are owned by those in bigger states. The fear is that under EU regulation, less well capitalised parent banks could drain the capital of their healthier subsidiaries in other countries. European Council President Herman Van Rompuy released a seven-page report this week envisaging an "integrated financial framework (that) should cover all EU states". EU-wide banking rules could make it easier for the European Union to support troubled banks, which are currently reliant on national governments for help in what has become a mutual spiral of debt and decline in some countries. SINGLE SUPERVISOR At the summit in Brussels, EU leaders will look at how to establish a banking union, including a single supervisor for the largest banks, a fund to wind down cross-border lenders in trouble and more-assured guarantees to protect depositors. The European Commission, the EU's executive, wants the banking union to apply to all countries to preserve the functioning of the bloc's borderless single market. But Britain, whose financial sector makes up a much bigger part of the economy than it does in most European countries, insists any EU banking rules should be limited to the euro zone. It is joined by the Czech Republic and Bulgaria. Other eastern European countries have so far declined to comment. But some, such as Poland, have similar concerns about keeping a tight hold on their banking systems. "It is very important for the countries which are not in the euro zone, like us, to make sure that these proposals concern the euro zone," Bulgaria's Iskrov told reporters. Neither Bulgaria nor the Czechs have joined the euro. Prague, like London, has also opted out of an EU fiscal pact. Its main political parties are at odds on how to approach further EU integration. Van Rompuy's proposal allows for differences between EU members and those outside the currency zone, but it also makes clear that the final word be at the European level. "For this country and its financial stability, some of the things proposed on the EU level over the last two weeks present substantial mid-term risks for financial stability," Czech central bank governor Miroslav Singer said in Prague. Link this Share this Digg this Email Reprints

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