Current Affairs Czechs content with EU banking, pro-growth deals
At a two-day summit in Brussels which ends on Friday, EU leaders agreed to set up a joint banking supervisory body to oversee banks in eurozone member states. They also approved a plan to boost growth in the bloc and agreed on a roadmap towards fiscal union in the euro zone. Czech officials, who initially expressed concern over proposals that the new banking authority should also supervise banks in countries outside the monetary union, seem content with the summit’s outcome.
Ahead of the EU summit in Brussels, Prime Minister Petr Nečas said Czechs would not throw a spanner in the works of the eurozone although some of the proposed measures could present a considerable risk for the Czech Republic.
Mr Nečas was talking about plans to establish a European banking supervisory body which some officials, including the governor of the Czech central bank, thought could weaken the position of the national supervisor.
But the summit decided that the planned banking authority will only supervise banks in eurozone countries which for Czechs will not change the status quo despite the fact that nearly all Czech banks are owned by banks based in the eurozone.
An analyst for the Czech branch of the Raiffeisen Bank, Pavel Mertlík, explains that Czech banks are already under de-facto supervision by both the Czech National Bank and the financial authorities in the countries of their mother companies.
“For example in our case, our key investor is Raiffeisen International in Austria which is supervised by the Austrian financial sector authority, and this supervision also tackles developments in the Czech chapter, that is the common practice.
“So if there are no big differences in the regulatory principles between the new common supervisory body and the current practices of the national supervisors – and I don’t expect that there could be any as they are based on the Basel rules which are uniform – I don’t think this will bring any big differences.”
Leaders of 27 EU nations also agreed to use the eurozone’s recue funds to bailout struggling banks directly, without having to go through the budgets of the individual states. That should help lower the borrowing costs for some of the troubled eurozone members such as Italy and Spain.
The summit also approved a 120 billion-euro pro-growth package including a 10 billion boost for the European Investment bank to which the Czech Republic will contribute 76 million euro.
In another significant move, the summit backed a plan to create a European treasury which would have an authority over the budget of individual eurozone countries. The 10-year-plan should put in place tighter rules and foster a fiscal union in the Eurozone, a move championed by German chancellor Angela Merkel.