EU Leaders To Set Tight Timetable On Completing EURO BANKING UNION.

EU Leaders To Set Tight Timetable On Completing EURO BANKING UNION.(Reuters).

* EU wants agreement on bank resolution by end-year

* Wants plan on rewarding reforms by December

* Reforms seen key for sustainable growth in Europe

BRUSSELS – European leaders will confirm on Friday an ambitious timetable for the completion of a banking union, Europe’s biggest project since the euro, and set a December deadline for fleshing out the idea of rewards for structural reforms in the euro zone.Policy-makers believe a banking union in the 18 countries that will share the euro from next year will help increase the flow of credit, boost growth and help prevent financial crises in the future.

Under the union, the European Central Bank will directly supervise the euro zone’s 130 biggest banks from November 2014 and have the power to take over supervision of any of the smaller banks if needed.

Such a Single Supervision Mechanism is to be accompanied by a Single Resolution Mechanism (SRM) – a yet-to-be-created euro zone authority with its own fund that would decide how to wind down or restructure banks that are no longer viable.

As an intermediate step towards the SRM, the euro zone wants to agree on a Bank Resolution and Recovery Directive (BRRD), under which national authorities would coordinate their actions to deal with cross-border bank failures.

Euro zone finance ministers have already agreed what this intermediate law should look like, but they now need to reach a deal on the details of the legislation with the European Parliament.

European leaders meeting in the European Council will urge the parliament on Friday to adopt the BRRD and the Deposit Guarantee Directive by the end of the year, draft conclusions of their meeting, seen by Reuters, showed.

The leaders will also set an end-year deadline for euro zone ministers to move on to the next step, by agreeing on how they want the SRM to work, according to the draft conclusions.

That common position on the SRM would also have to go through the European Parliament – and time is short because the last parliamentary session before elections is in mid-April.

The European Council “underlines the commitment to reach a general approach by the Council (of ministers) on the Commission’s proposal for a Single Resolution Mechanism by the end of the year in order to allow for its adoption before the end of the current legislative period,” the conclusions said.

The European Commission, the EU executive arm, has proposed that it should be the single resolution authority – an idea that Germany opposes.

TESTS, BACKSTOPS, REFORMS AND REWARDS

Meeting all the deadlines appears ambitious, but it would allow the single resolution authority and its fund, which is to be financed from contributions from the banking sector, to become operational in early 2015 – an date favoured by the ECB.

Before the ECB takes over its supervisory duties, it wants to check all the banks’ financial health, by estimating the value of their assets under various adverse scenarios.

Because policy-makers expect the ECB check to show that some banks need more capital, EU leaders will reiterate that governments should be prepared to help if a bank cannot raise additional funds from the market.

“Member states should make all appropriate arrangements, including national backstops, applying state aid rules,” the draft conclusions said.

EU leaders also want to flesh out in December a plan for euro zone countries to sign contracts with European institutions, promising to bring in reforms to make their economies more stable. Under the scheme, countries would get money if they deliver.

“Work will be carried forward to strengthen economic policy coordination, including by agreeing in December on the main features of contractual arrangements and of associated solidarity mechanisms,” the draft conclusions said.

Some policy-makers are sceptical about such contracts, mainly because no money has yet been set aside for “solidarity mechanism”.

Cash-strapped governments would be reluctant to create a new fund of a meaningful size on top of their existing commitments to the EU-wide long-term budget.

“These contractual arrangements are extremely unattractive because they are either not possible to finance or they are a bit condescending – it is a bit like telling the kids what to do and then giving them some pocket money,” one senior policy-maker said.

Related:

Hmmm....Is Luxemburg next? Luxembourg Warns of Investor Flight from Europe

Hmmm....Is Luxemburg next? Luxembourg Warns of Investor Flight from Europe

Hmmm....Is Luxemburg next? Luxembourg Warns of Investor Flight from Europe.(Spiegel).
The debate over this week's "bail in" of bank account holders in Cyprus as part of the country's debt crisis bailout is continuing to simmer in Europe. In Luxembourg, Finance Minister Luc Frieden has warned that the example set in Cyprus by taxing people holding €100,000 ($129,000) or more in their accounts could drive investors out of Europe.

"This will lead to a situation in which investors invest their money outside the euro zone," he told SPIEGEL. "In this difficult situation, we need to avoid anything that will lead to instability and destroy the trust of savers."

Earlier this week, Euro Group President Jeroen Dijsselbloem sparked an enormous controversy after stating that the solution found in Cyprus could be applied throughout the euro zone in the future.

The remark triggered immediate criticism from his predecessor as head of the Euro Group, Luxembourg Prime Minister Jean-Claude Juncker. "It disturbs me when the way in which they tried to resolve the Cyprus problem is held up as a blueprint for future rescue plans," Juncker told German public broadcaster ZDF earlier this week. "It's no blueprint. We should not give the impression that future savings deposits in Europe might not be secure. We should not give the impression that investors should not keep their money in Europe. This harms Europe's entire financial center."

Hmmmm.....yesterday Reuters: "Hands off our banking sector, Luxembourg tells euro zone." seems they know they're on the 'Hit List'.Read the full story here.

Related: MFS on Wednesday - "The Great Euro Bank Robbery" - Hands off our finance sector, Luxembourg warns

Hmmmm.....As i wrote on Monday: Reading material Here:

Euroclear Bank is subject to effective regulation, supervision and oversight of the NBB and FSMA, but cooperation with the Luxembourg authorities should be improved.

The legal framework provides the Belgian authorities with sufficient powers to obtain timely information and induce change.
However, as Euroclear Bank is in competition with the Luxembourg based Clearstream Banking Luxembourg—which offers similar settlement and banking services––close cooperation with the Luxembourg authorities is needed to avoid any competition on risk management frameworks.

As both entities are highly relevant for the global financial stability the Belgian and Luxembourg authorities should evolve from the existing cooperation towards a cooperative framework that would allow them to take common decisions and implement these simultaneously in both entities.

The plans to include Euroclear Bank on the list of eligible banks for the SSM may further contribute to a level playing field.

77. The national securities depositories of Belgium, France, and the Netherlands, that share a common IT platform provided by the Euroclear Group, are subject to effective regulation, supervision, and oversight of the Belgian, Dutch, and French authorities, despite the fact that the legal frameworks differ substantially between the three countries. The cooperation between the different authorities is effective and contributes to the financial stability in Belgium, France, and the Netherlands. Crisis management frameworks are in place that are regularly tested and updated

"The Great Euro Bank Robbery" - Cyprus Popular Bank’s large deposit holders could face 80% cut.

"The Great Euro Bank Robbery" - Cyprus Popular Bank’s large deposit holders could face 80% cut.(RT).

Cyprus Popular Bank’s richest clients with uninsured deposits over €100,000 could get only 20% of their money, as the government eyes to wind down its operations, says Finance Minister Michalis Sarris.

"Realistically, very little will be returned," Sarris said in a televised interview with state broadcaster CyBC, adding that it could also take years before those depositors see any of their money back.

“Certainly, for depositors above 100,000 euros it could be a very significant blow," Sarris concluded.

Earlier it was reported the losses facing large depositors at Bank of Cyprus could reach as much as 40%.

The island’s second biggest lender, Cyprus Popular Bank (Laiki), has faced the most serious troubles amid the crisis. Its healthy part will merge into the Bank of Cyprus transferring a debt of 9.2 billion euros and leaving around 8 thousand employees in Cyprus and abroad without work.

Russian companies and businessmen, who between 2007 and 2011 transferred around $135 billion to Cyprus seem to be the most affected.

On Wednesday, the Russian state-owned Bank for Development and Foreign Economic Affairs announced plans to work out a way to help Russian firms with money in Cyprus. Usually the bank helps only too-big-to-fail companies.

Meanwhile, the US-based credit agency Moody's has said the Cyprus crisis puts extra pressure on the Eurozone's downgrade-threatened sovereign ratings, and shows policy makers overestimated their ability to contain the crisis. Market analysts fear that could set a dangerous precedent for future rescue efforts and make the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe.Hmmmm......At which time will people say "ENOUGH" of that Euro communism?I hope people with deposits in Luxembourg learned their lesson and have an Easter 'banking trip' to Luxembourg. Read the full story here.

"The Great Euro Bank Robbery" - Hands off our finance sector, Luxembourg warns

"The Great Euro Bank Robbery" - Hands off our finance sector, Luxembourg warns.(HD).

Luxembourg railed on Wednesday against what it fears is a new eurozone position that oversized finance sectors must be scaled back in line with national economic output following the Cyprus banking debacle.

Former Eurogroup chairman Jean-Claude Juncker's government is "concerned about recent statements and declarations that were made since the crisis in Cyprus sharpened", a news release said.

Specifically, it rejects "general assessments of the size of the financial sector in relation to a country's GDP (gross domestic product) and the alleged risks this poses for economic and fiscal sustainability".

The government said the Luxembourg finance sector acts as "an important gateway for the euro area by attracting investments and thus contributing to the general competitiveness of all member states".

Juncker's successor as eurozone head, Dutch Finance Minister Jeroen Dijsselbloem, has said that the Cypriot financial sector was too big compared with the country's overall gross domestic product, a problem that has forced Cyprus to break up one Cypriot bank and downsize another in exchange for an international bailout worth 10 billion euros ($13 billion).

While few eurozone economies depend on the banking sector as heavily as Cyprus does, Berenberg Bank economists noted on Monday that bank assets in three other eurozone countries were bigger as a percentage of gross domestic product than in Cyprus, where they amounted to more than 700 percent of GDP in 2011.

In Luxembourg, the percentage was an astounding 2,500 percent, the economists said, while in Ireland they were more than 800 percent and in Malta close to 800 percent. The eurozone average was given as 360 percent.

"The financial sector is oversized compared to the rest of our economy," a senior Luxembourg government official nevertheless told AFP on condition of anonymity.

And yet, European Union Markets Commissioner Michel Barnier was quick to insist earlier this week that "the problem is not Luxembourg -- it was certain banks in Ireland, in Spain, in Portugal." One of six founding members of the EU, Luxembourg is one of just four eurozone states -- alongside Germany, the Netherlands and Finland -- to have maintained a triple-A classification with all three major global credit rating agencies Moody's, Fitch and Standard and Poor's.

Its debt-to-GDP ratio is in the region of 20 percent -- compared to a target 120 percent for bailed-out partners -- and its deficit is well within the regularly-ignored EU threshold of three percent.

Yet Luxembourg has increasingly come under an EU microscope in post-global financial crisis legislative clean-up action, primarily for its culture of banking secrecy.Read the full story here.

Hmmmm.....As i wrote on Monday: Reading material Here:

Euroclear Bank is subject to effective regulation, supervision and oversight of the NBB and FSMA, but cooperation with the Luxembourg authorities should be improved.

The legal framework provides the Belgian authorities with sufficient powers to obtain timely information and induce change.
However, as Euroclear Bank is in competition with the Luxembourg based Clearstream Banking Luxembourg—which offers similar settlement and banking services––close cooperation with the Luxembourg authorities is needed to avoid any competition on risk management frameworks.

As both entities are highly relevant for the global financial stability the Belgian and Luxembourg authorities should evolve from the existing cooperation towards a cooperative framework that would allow them to take common decisions and implement these simultaneously in both entities.

The plans to include Euroclear Bank on the list of eligible banks for the SSM may further contribute to a level playing field.

77. The national securities depositories of Belgium, France, and the Netherlands, that share a common IT platform provided by the Euroclear Group, are subject to effective regulation, supervision, and oversight of the Belgian, Dutch, and French authorities, despite the fact that the legal frameworks differ substantially between the three countries. The cooperation between the different authorities is effective and contributes to the financial stability in Belgium, France, and the Netherlands. Crisis management frameworks are in place that are regularly tested and updated.

'до свидания' - Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?

'до свидания' - Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?(ZeroHedge).By Tyler Durden.

Yesterday, we first reported on something very disturbing (at least to Cyprus' citizens): despite the closed banks (which will mostly reopen tomorrow, while the two biggest soon to be liquidated banks Laiki and BoC will be shuttered until Thursday) and the capital controls, the local financial system has been leaking cash. Lots and lots of cash.
Alas, we did not have much granularity or details on who or where these illegal transfers were conducted with. Today, courtesy of a follow up by Reuters, we do.
The result, at least for Europe, is quite scary because let's recall that the primary political purpose of destroying the Cyprus financial system was simply to punish and humiliate Russian billionaire oligarchs who held tens of billions in "unsecured" deposits with the island nation's two biggest banks.
As it turns out, these same oligrachs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.
From Reuters:

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates?
Just brilliant.
And if there was any doubt that the entire process of destroying one entire nation was simply to punish Cyprus, it can be completely cleared away now:

ECB officials contacted Latvia, another EU country that has received large Russian deposits, to warn authorities against taking in Russian money fleeing Cyprus, two sources familiar with the contacts said.

"It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus," a euro zone central banker said.

If one thinks there is any material Russian cash therefore left in Cyprus with this epic loophole in place, we urge them to make a deposit in the insolvent nation. One person who certainly will not be allocating any of his money into Bank of Cyprus is German FinMin Schaeuble:

German Finance Minister Wolfgang Schaeuble said the bank closure had limited capital flight but that the ECB was looking closely at the issue. He declined to provide figures.

Perhaps because if he did, it would become clear that the only entities truly punished by this weekend's actions are not evil Russian billionaires, but small and medium domestic companies, and other moderately wealthy individuals, hardly any of them from the former "Evil Empire."

Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products, medicines and jet fuel were allowed.

The stealth withdrawals by Russians of course means that the two megabanks are now utterly drained of capital, and that the haircuts on those who still have unsecured deposits with the two banks will be so big it will likely mean a complete wipeout of all deposits. As in 0% recovery on your deposits!
In other words, by now any big Russian funds in Cyprus are long gone, and the only damage accrues to the locals: for one reason because their money over the critical EUR100K threshold has been "vaporized", and for another because the marginal driving force and loan demand creator in Cyprus, the Russians, are gone and are never coming back again.
This is what passes for monetary real-politik in the New Normal - an entire nation becomes collateral when pursuing a wealthy group of people. And the "wealthy group" is victorious in the end despite everything...
If we were Cypriots at this point we would be angry. Very, very angry.Read the full story here.

Matt O’Brien‏@ObsoleteDogma

Cyprus is done as a tax haven. Latvia has been warned to stop if it wants to join the euro. Luxembourg & Malta know they could get Cyprus’d.



Reading material Here:

Euroclear Bank is subject to effective regulation, supervision and oversight of the NBB and FSMA, but cooperation with the Luxembourg authorities should be improved.

The legal framework provides the Belgian authorities with sufficient powers to obtain timely information and induce change.
However, as Euroclear Bank is in competition with the Luxembourg based Clearstream Banking Luxembourg—which offers similar settlement and banking services––close cooperation with the Luxembourg authorities is needed to avoid any competition on risk management frameworks.

As both entities are highly relevant for the global financial stability the Belgian and Luxembourg authorities should evolve from the existing cooperation towards a cooperative framework that would allow them to take common decisions and implement these simultaneously in both entities.

The plans to include Euroclear Bank on the list of eligible banks for the SSM may further contribute to a level playing field.

77. The national securities depositories of Belgium, France, and the Netherlands, that share a common IT platform provided by the Euroclear Group, are subject to effective regulation, supervision, and oversight of the Belgian, Dutch, and French authorities, despite the fact that the legal frameworks differ substantially between the three countries. The cooperation between the different authorities is effective and contributes to the financial stability in Belgium, France, and the Netherlands. Crisis management frameworks are in place that are regularly tested and updated.