European Union governments made progress toward forging closer banking ties as they reached an initial agreement on rules that will make it easier to wind down smaller lenders in trouble.
The 27 member states will now negotiate with the European Parliament on the final shape of the legislation, according to a statement Wednesday in Brussels. Bloomberg reported late last month that a deal was close.
European banking fractured along national lines after the 2008 credit crunch, and subsequent efforts to put in place the architecture needed for a truly unified market ran out of steam in recent years.
The package that governments agreed on is widely viewed as a key step toward deeper – and potentially thornier – reforms such as a system of joint deposit insurance like the one that exists in the US.
The agreement isn’t as ambitious as the European Commission’s original proposal. It may not significantly expand the number of banks that can be sent into resolution and there’s a risk that lenders won’t be able to access related funds because the deal puts too many conditions in place, according to an EU official, who spoke on condition of anonymity.
Germany’s cooperative banks, who have been among the chief critics of the plan, said improvements are still needed, even though governments acknowledged the value of safety nets that such groups of lenders have in place.