German Finance Minister Wolfgang Schaeuble said Europe is moving gradually toward a banking union and is on its way toward solving the issue of existing bad debt in the banking industry.
“We’re working step-by-step in the direction of a European banking union to separate the risks of sovereign debts and the banking system,” Schaeuble said in a speech in English at the Council on Foreign Relations in Washington. “We’re on the way and we’ll find a common solution” for the “very complicated issue of legacy” debt, the minister said.
Europe, which has been “over-banked,” needs “a strong and a European supervision of banks,” Schaeuble said. Implementation of the Single Supervisory Mechanism in coming weeks is an important step on the way, he said.
The European Central Bank is set to take on oversight powers over all euro-area banks next year after the legislation underpinning the supervisory system was signed off yesterday in Brussels. Irish Finance Minister Michael Noonan, whose country holds the EU’s rotating presidency, said the next building blocks on the way to a banking union should be bank resolution and deposit guarantees.
Schaeuble and Jens Weidmann, the country’s central bank chief, said earlier today that treaty changes are needed to put a future European banking union on a sound legal footing. As Germany’s highest court is strict about monitoring the legality of transfers of power away from the government and parliament, “limited treaty change” will be necessary, Schaeuble said.
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