One area, though, where Juncker clearly deserves the market’s backing is in renewing the push for a European deposit insurance scheme, so that all countries guarantee retail deposits when a bank goes down. The Commission has been banging this drum for years, supported by the ECB, and the IMF, but implacable German opposition has stopped progress.
But the excuses are running out. While the summer has seen more than its fair share of European bank failures, the ECB is now strapped in firmly as the common eurozone supervisor.
The ECB has been visiting all Europe’s big banks and reviewing their capital models since the spring, and new rules on creditor hierarchies should mean EU banks have more in common than ever before. A deliberate policy of mixing nationalities and traditions on supervisory teams has put an end to the worst sweetheart deals, and there are moves afoot to strengthen the European Banking Authority as well.
If all this activity is to have credibility, the sceptical Germans must swallow their fears of bailing out the eurozone periphery and jump in with both feet. If German taxpayers can’t trust the piles of new capital, loss-absorbing debt, asset quality reviews, stress tests, and model reviews even right at the top of the capital stack, then what right do they have to expect investors to take the regulatory regime seriously when it comes to riskier instruments?
Strip away the technical terminology, and it comes down to a simple proposition: put your money where your mouth is.