An announcement was made by the European Union on Wednesday that outlined a bank union continent-wide that would help deal with crisis’ in the future in banking, instead of leaving them to the already struggling governments in each nation.
The new proposal includes a single deposit guarantee unit for the entire EU covering all the banks in the union, something that is similar to what the U.S. has in the FDIC that covers its bank’s deposits. In addition, there would be common authority and a fund that would help to deal with any bailouts needed for banks that cross borders and are the major players in the banking system of Europe.
One single supervisor from the EU with the powers to make the ultimate decision for major banks would be established and the banks would have to follow a set of common banking rules.
The rescue funds amount was not mentioned. However, the statement made by the EU said a number of countries within the 27 members approved funding for emergencies in the amount of $5.6 trillion between 2008 and 2011, equivalent to about 37% of the GDP for the EU.
This announcement comes, as the Central Bank in Europe did not change its key interest rate at its meeting to discuss the ongoing public debt problem.
