European leaders will pledge on Friday to finalize the EU’s banking union in the future, but will leave it to their finance ministers to work out when, their draft conclusions showed.
Completion of the banking union, which would mean setting up a controversial common deposit insurance scheme, would sharply reduce the possibility of a major banking crisis in the 19 countries sharing the euro and in this way bolster market confidence in the euro and demand for the currency.
But the issue is highly sensitive in several euro zone countries and euro zone finance ministers together with their non-euro colleagues from other EU countries have been stuck trying to agree on the deposit guarantee scheme for years.
“We reiterate our full commitment to the completion of the Banking Union and, capitalising on recent discussions, invite (EU finance ministers) to agree, without delay and on a consensual basis, on a stepwise and time-bound work plan on all outstanding elements needed to complete the Banking Union,” the draft said.
The main outstanding element is the EU-wide deposit guarantee, because there already is a single bank supervisor and a single resolution mechanism for banks that fail.