June 11, 2012
Over the last ten days or so there has been much talk about a European Banking Union (if this is all news to you, this post by Gavyn Davies in the FT explains all you might need to know). Since that post has been written there has been much said and thought and of course the nottabailout in Spain of the banks.
As always, the folks atop the EU are speaking about this as the next great solution to the eurozone crisis. There have been, of course, a number of next great solutions – none of which has been anything like a solution so far.
Thus, it was with little surprise that I read something a few days ago that came out of the annual conference of the International Institute of Finance in Copenhagen. The leading bankers attended seem to agree that a banking union could take twenty years to implement. I don’t imagine for a second that anything can or should take that long to implement, but still, if it only took two years it would likely be too late.
Also from the conference was this from Mr Douglas Flint, Chairman of the Board, “One of the most important lessons of the financial crisis was that banks must be able to take risks, must be able to fail, and therefore must be capable of being resolved upon failure. With the determination of national authorities and the cooperation of private financial institutions, we believe that an effective resolution system can be put in place.”
So EU leaders are trying to find a way to ensure that banks can be regulated and saved at EU level, while bankers want to be sure that banks can take risks and fail when they get things wrong. This sounds like it has the potential to be another nice idea that gets stuck in the long grass of lobbying and makes little meaningful progress. Considering the understandable amount of banker bashing that has gone on over the last two years or so in the media across the EU (and in the US), it would seem that the public at large will be all for banks failing if appropriate. Looking at the amounts of money that have already left the banking system in countries such as Greece and Spain, trust and confidence are already long gone.
The question will be how to let banks trade off the latest stock or forex news or whatever, take risks and not be able to bring down the entire world economy if and when they screw up. All of this is making me wonder whether we shouldn’t be trying to promote barter much more through the EU… 🙁financialguy