EU to propose plan to establish united banking authority in June

10530873-european-union-logoThe European Union will present a proposal in June that would build a banking union through the creation of a single banking supervisor and a joint mechanism to handle failing financial institutions.

“I’ve understood the determination of ministers to conclude on another element of banking union: the tool box for resolution and the EU authority for resolution that I will propose in June,” Michel Barnier, the  internal market commissioner for the European Commission, said, according to 4-traders.

Barnier said the commission supported a shared bank deposit guarantee, adding that altering existing European treaties was not required to establish the banking union, though it could be a future possibility.

“If there are later changes of treaty, [they] would reinforce, better define and consolidate the elements of banking union that will be operational,” Barnier said, 4-traders reports.

EU officials have called for the establishment of a central resolution authority to handle large bank failures in the eurozone as part of an effort to reduce financial risk to sovereign economies, according to Businessweek.

Under last year’s proposals by the commission, beginning in 2018, regulators would have the authority to impose creditor writedowns. Barnier said he would be open to the idea of an earlier effective date, as called for by the European Central Bank and German government, under the condition that progress is made in establishing a single resolution authority and deposit fund.

“In order to avoid fragmentation in the Single Market, all parts of the banking union must be in place,” Barnier said, Businessweek reports. “This includes agreement on the complete tool-kit of resolution tools. And most importantly, common financial backstops.”