German banks say faster buildup of euro zone bank fund "unacceptable"

Reuters

By Andreas Kröner

FRANKFURT, Feb 21 (Reuters) - A proposed acceleration of payments into the fund to finance euro zone bank closures would put unacceptable strains on German banks, five of Germany's banking associations said in a letter to Finance Minister Wolfgang Schaeuble.

As agreed so far, the fund would total 55 billion euros ($75.6 billion) over 10 years. But EU officials are worried that might not be enough, and have asked that the deadlines for payment and full mutualisation of contributions be halved.

The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said on Tuesday the ministers were discussing several ways of ensuring the fund would always have enough cash and that he expected a compromise deal in March.

Schaeuble, initially not keen on the idea of faster mutualisation, has said that if funds were to be shared more quickly, banks would have to fill the fund more quickly too.

In the letter seen by Reuters, dated Feb. 5, the banking groups said they were "greatly concerned" about such proposals.

"The resulting doubling of annual payments would increase the strain on contributing banks to a level no longer acceptable," the letter said, referring also to other regulatory costs banks will have to meet in future.

Under the plan, euro zone countries could use mainly what their own banks had paid into so-called "national compartments" if a bank were to be closed during a 10-year period. Access to other national compartments would grow only gradually.

The European Central Bank, which will start its new task as euro zone banking supervisor in November, is also interested in having a European backstop in place sooner rather than later and has suggested shortening the time frame for mutualisation.

"This would create an opportunity for states participating in the Single Resolution Mechanism to shift loss-making legacy assets that emerged under national responsibility to the European level prematurely," the banks said in the letter.

German cooperative banks, public banks, savings banks, private commercial banks and specialist Pfandbrief banks all signed the letter.

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