The banks have been classified as ‘significant’ and will be included in the euro zone banks to be directly supervised by the ECB, as part of the new Single Supervisory Mechanism, a representative of the Finance Ministry told the Parliamentary Committee on European and Foreign Affairs, which was updated on Friday on developments related to the European banking union.
The Finance Ministry believes that the completion of the banking union is “very important”, said the Ministry’s representative, noting that the ECB will assume its supervision role after the banks pass the stress tests the results of which will be announced in October.
Head of the European Commission representation in Cyprus, Georgios Markopouliotis told the MPs that the banking union aims at breaking the vicious circle between sovereigns and banks, restore financial stability in Europe and ensure that taxpayers will not need to pay again to rescue banks.
According to him, between 2008 and 2010, €1.6 trillion was given in state aid and guarantees in the EU to rescue banks, an amount corresponding to 13% of the Union’s GDP.
Markopouliotis analysed the basic pillars of the banking union, pointing out that the regulatory framework ensures that deposits under €100,000 (per depositor/per bank) will be protected anywhere and any time in the EU.
A €10 billion financial assistance package agreed in March 2013 between Cyprus and the Troika of international lenders (EC, ECB, IMF), featured a sizeable reduction of the island’s banking sector, as well as a bail-in of uninsured deposits. Cyprus closed one bank, the Popular, whereas 47.5% of deposits over €100,000 in the Bank of Cyprus were converted to capital to plug a nearly €4 billioncapital shortfall.
Source: Financial Mirror