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European banking union on track - Austrian watchdog FMA

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(Globalpost/GlobalPost)

VIENNA (Reuters) - Austria's FMA markets watchdog expects the main pillars of the new European banking union to take effect as scheduled despite German reservations, senior FMA officials told reporters.

Banking union aims to shore up the euro zone by breaking the "doom loop" between ailing banks and state finances. As a first step, the European Central Bank is to start supervising euro zone banks next year.

Financial Market Authority co-head Helmut Ettl said plans were on track to have the ECB take on that role.

"We welcome this project and think that the current timetable will hold so that the project gets its legal basis in July of this year and the whole thing goes operative at the middle of next year at the latest," he said late on Wednesday in remarks for release on Thursday.

A resolution scheme to close or salvage struggling banks should follow. The third and final step would be a coherent framework across Europe for deposit protection.

But Germany, backed by allies like Austria, has called for a change in the EU treaty to allow for the union, raising questions about how fast it can be implemented.

German Finance Minister Wolfgang Schaeuble wants amendments to permit common rules on shutting troubled banks - a central element of the union that aims to stabilise the euro zone and keep taxpayers from footing bank rescue bills.

Asked when a single bank windup scheme could be in place given Schaeuble's comments, Ettl said: "We assume that work will continue according to the existing timetable, and the goal there is to have an agreement this year. We do not know yet what the agreement will look like."

Experience has shown that "you find solutions when the burden of suffering is big enough, so we are absolutely optimistic here," he added.

FMA officials said it remained open whether the European Banking Authority (EBA) would conduct bank stress tests this year as it prepares to hand over responsibility for overseeing major euro zone lenders to the ECB in 2014.

They had said in January that the EBA - which monitors banks in all 27 EU countries - planned stress tests on major banks this year. Sources close to the matter had said the ECB and EBA aimed to carry out joint tests in September.

But Ettl said the status of testing was still undecided.

"The ECB is not preparing any stress test at the moment. It is being discussed whether a stress test will be conducted at the EBA level. There are no final decisions yet," he said.

He said future stress tests would not be stricter, but more reliable.

Seven Austrian banks will fall under direct ECB supervision: Erste Group <ERST.VI>, the Raiffeisen Zentralbank group <RZB.UL> including listed unit RBI <RBIV.VI>, BAWAG PSK <CCMLPB.UL>, Raiffeisen banks in Upper Austria and Lower Austria/Vienna, Hypo Alpe Adria <HAABI.UL>, and the Volksbanken <OTVVp.VI> group.

Bank Austria will be included via Italian parent UniCredit <CRDI.MI>.

The FMA shares responsibility for bank supervision with Austria's central bank, but this will change once the ECB takes on direct oversight of 130 to 150 big euro zone lenders.

On other subjects, FMA co-head Klaus Kumpfmueller said Austria would "presumably" have its own central counterparty (CCP) for clearing over-the-counter derivative trades under a new regulatory regime that is now taking shape.

He said the Wiener Boerse stock exchange operator and Oesterreichische Kontrollbank - Austria's main provider of financial and information services to the export industry and capital market - planned to jointly launch a CCP in Austria.

The first mandatory clearing of derivatives is supposed to start in the second quarter of 2014 across Europe, he said.

World leaders agreed in 2009 during the financial crisis to crack down on trading in the opaque multi-trillion-dollar derivatives market.

(Reporting by Michael Shields; Editing by Catherine Evans)

http://www.globalpost.com/dispatch/news/thomson-reuters/130418/european-banking-union-track-austrian-watchdog-fma