LONDON (Reuters) – A European banking union should be fully open to non-euro zone countries in emerging Europe, enabling them to access bank bail-out funds, the European Bank for Reconstruction and Development said on Wednesday.
The European Commission has proposed a European Central Bank-led single banking supervisor for the euro zone, which would allow recapitalisation of failing banks from the European Stability Mechanism (ESM).
Non-euro zone countries can also opt into the union, but without the option of recapitalisation.
The ESM backstop “could prove essential in stopping the ongoing crisis”, EBRD chief economist Erik Berglof said in the bank’s annual transition report.
“This would benet all of Europe, including emerging European countries that are outside the euro zone.”
Euro zone, European Union and non-EU countries in the EBRD’s operational region of emerging Europe have been hit by the global financial crisis and more recently by the euro zone sovereign debt crisis.
The EBRD also proposed introducing an associate member status for European countries that cannot or do not want to become full members of the banking union.
Associate members would benefit from ECB liquidity support and sharing of supervisory responsibility between countries, but not from fiscal support, the EBRD said.
The prevention of disorderly deleveraging by western European banks from central and eastern European subsidiaries is the focus of the Vienna 2.0 initiative, spearheaded by the EBRD.
The EBRD was set up in 1991 to help former soviet countries make the transition to market economies. It has expanded its mandate in recent years to North African and Middle Eastern countries Egypt, Jordan, Morocco and Tunisia.
“The past year has been a difcult one for the transition region as growth weakened and the economic outlook worsened signicantly,” the EBRD said in the report.
“There is no sign of the major reform drive needed to boost growth rates towards their long-term potential.”
The EBRD forecasts growth of 2.7 percent this year across the region, and 3.2 percent in 2013.
(Reporting by Carolyn Cohn; Editing by Toby Chopra)
.
