After a decade of talking about how to react should a bank operating in several European countries veer toward collapse, EU finance ministers on Friday agreed on some ground rules that could see governments share the cost of rescuing them.
The agreement signed on Friday by 27 EU nations is vague about how governments would work together to prevent widespread financial damage, but it does set out principles addressing when they would act, as well as clarifying priorities.
It would convene groups of national regulators for the more than 40 banks that do business across borders. These groups should plan what to do in the event of a crisis.
But officials said EU nations were still at odds on how far they needed to go to strengthen supervision and financial experts would have to continue talks to fix details.
Some nations — such as Italy — have suggested that one regulator should take the main crisis management decisions for a cross-border bank, something other supervisors strongly oppose.
“This is not a subject of consensus yet,” said Slovenian Finance Minister Andrej Bajuk, who led the talks.
Nor was there any agreement on how EU countries would split the cost of bailing out a bank with public money, he said.
European Central Bank President Jean-Claude Trichet said many national central bank governors had emphasized the danger of giving banks any kind of potential safety net paid for by taxpayers.
“The idea of sharing the burden at the international level is even considered by some as something which is far away from the present possibilities,” he said.
The text of the agreement says regulators do not aim to prevent bank failures.
“The objective of crisis management is to protect the stability of the financial system ... and to minimize potential harmful economic impacts. The management of an ailing institution will be held accountable, shareholders will not be bailed out and creditors and uninsured depositors should expect to face losses,” it said.
The agreement comes less than a year after Northern Rock stumbled toward insolvency and went to the Bank of England for help.
That led to the UK’s first bank run in more than a century.
Last month, the US Federal Reserve brokered a deal to keep the collapse at Bear Stearns from spilling over into the broader economy.
European finance ministers said government assistance would always be a last resort and there was no guarantee of help. Private sector solutions will always come first, the document said — and a government rescue “will only be considered to remedy a serious disturbance in the economy.”
European banks are increasingly making cross-border acquisitions — deals that have been strongly encouraged by EU officials who say it will boost competition and reduce costs.
Italy’s UniCredit leapt into Europe’s top 10 lenders by buying Germany’s HVB three years ago, while Spanish bank Santander, Franco-Belgian counterpart Fortis and Royal Bank of Scotland recently won a joint bid for the Netherlands’ ABN Amro.
This wave of consolidation raises the risk of a failure big enough to ripple across two or more European nations, speeding up 10 years of regulators’ discussions.
“What’s 10 years in Europe-land?” the EU’s top financial services official, Charlie McCreevy, said. “Financial turmoil has sharpened the focus. It’s now time to do something.”
CHANGE OF FORTUNES: Concern over a pricey valuation and the risk of tighter US curbs on chip sales to China have poured cold water on TSMC’s bullish momentum Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares fell the most in three months yesterday upon trading resumption, joining a global technology rout as investors dramatically soured on the promises of artificial intelligence (AI). The shares declined 5.62 percent to close at NT$924 in Taipei, dragging down the benchmark TAIEX, which fell 3.29 percent to 22,119.21 points amid a technical correction, Taiwan Stock Exchange data showed. Other chip stocks also fell, with ASE Technology Holding Co (日月光投控) plunging 9.86 percent, MediaTek Inc (聯發科) dropping 2.35 percent, Realtek Semiconductor Corp (瑞昱) falling 1.33 percent and United Microelectronics Corp (聯電) retreating 1.17 percent, while Apple
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Odd lot trades of contract chipmaker Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) shares surged on Friday, although the stock faced headwinds, tumbling more than 5 percent in the session, the Taiwan Stock Exchange (TWSE) said. The volume of odd lot trades of TSMC shares totaled about 9.84 million shares on Friday, up sharply by about 400 percent from Tuesday, in a session before the local stock market closed due to Typhoon Gaemi on Wednesday and Thursday, the TWSE added. Stocks in Taiwan are usually bought or sold in lots of 1,000 shares. The nation lifted a ban on odd lots during regular