Support is building among European leaders to establish an EU banking union. Ahead of this week’s top EU summit, the leaders of France, Germany, Italy, Spain and Austria are in favour of giving up supervision over cross-national banks and installing one single powerful European supervisor. An EU banking union would mean that all participating countries would be responsible for taking care of each other’s banks. The proposal has already met resistance, however. The UK has declared that it does not intend to let British taxpayers pay for failing eurozone banks.

The original proposals have come from top-level bureaucrats such as Commission President Barroso and Christian Noyer, Head of the Bank of France. The ideas can be grouped along three main lines.

EU banking union

In this scenario, there would be one single supervisor, one rulebook for dealing with banks in crisis, and a common protection for deposits in all 27 EU Member States. If any EU country refuses to take part, the rest would be able to proceed anyway. According to the Commission, this solution is possible to do within the frame of the present EU treaties, although a common deposit fund would require that all countries are in agreement.

Eurozone banking union

A unanimous vote by the Eurozone finance ministers could give the European Central Bank supervisory powers and ability to take care of failing banks. Protection for deposits would also be included and the rules would cover only Euro-zone countries, which would give up their national supervisory control in this scenario.

Intergovernmental banking union

Here, those countries which are in favour of establishing a common banking union would go ahead and do so between themselves. In that case, a new institution would be established to oversee banking activities within the pact. Such a proposal would risk creating serious tensions between EU countries inside the pact and those outside. It would also diminish the EU Commission’s powers, as the rules would be created outside of the EU framework.

Consequences for Nordic finance employees?

From NFU’s point of view, three questions spring to mind. First, are we as Nordics ready to support failing banks in other parts of Europe? The first of the scenarios above could go through without Nordic support as it only requires simple majority in the Council. A country would be free to stay out of the EU banking union, though – a case which would bring a second question to the fore: what would be the consequences of standing at the sideline? Such a “two-speed Europe” would risk creating political tension within the EU.

And now to the third question: would there be any consequences for the NFU member unions? NFU has always advocated for the value of a level playing field in Europe. In relation to supervision, great improvements were made in 2011 when the new EU supervisory authorities were installed. But the real power still lies with the national supervisors. If the proposal for a banking union becomes a reality, we must carefully analyse whether a single EU supervisor is the best solution for the Nordic banks and trade unions. NFU will closely follow the development of the issue.