EU banking union 'not dead, just napping', says EU official

By Huw Jones

LONDON (Reuters) - The European Union's decade-old push to complete a unified banking market is set to hit the buffers again but is "not dead, just napping", an official from the bloc said on Tuesday.

Plans for a banking union were launched in 2012 to create a single system for regulating top euro zone lenders to ensure taxpayers were no longer on the hook for rescuing failing lenders, as they were during the global financial crisis.

The European Central Bank was made the lead regulator for big euro zone banks like UniCredit, BNP Paribas and Deutsche Bank, and a separate watchdog set up for handling failing lenders.

But efforts to introduce the Banking Union's final 'pillar', a bank-funded European deposit insurance scheme to compensate customers of a failed bank, have repeatedly floundered, with Germany worried it would end up bailing out banks from other member states.

Euro zone finance ministers were aiming to agree in Luxembourg on Thursday a comprehensive plan set out in April for a roadmap to implement the banking union's remaining elements.

Only a partial 'road map' will be agreed, however, due to a lack of consensus. It will focus on the crisis management framework and rules governing the use of national deposit guarantee schemes, the EU official said.

"This is not the full work plan that we were contemplating, but it's still a very important piece of the Banking Union," the EU official said.

There would then be a stock take on whether the "time is right" to try again for a deal on issues like the common deposit insurance scheme.

"Is the Banking Union dead? No, it's certainly not dead, it's taking a nap for a little while, but it's far from dead," the EU official told reporters.

Member states face pressing geo-political and economic issues which may have contributed to a lower sense of urgency for the Banking Union, the official said.

(Reporting by Huw Jones; Editing by Alexandra Hudson)

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