Showing posts with label SRM. Show all posts
Showing posts with label SRM. Show all posts

Sunday, May 18, 2014

17/5/2014: That costly alphabet soup behind the European Banking Union


Two main building blocks of the Single Resolution Mechanism for future banks bailouts in the EU involve Deposit Guarantee Scheme Directive (DGSD) and the Bank
Recovery and Resolution Directive (BRRD). The issue at hand is funding the future bailouts.


The EU Member States are required to establish two types of financing arrangements:

  • BRRD sets up the Resolution Fund to cover bank failure resolution. This will be used after 8% of losses gets covered by the bail-in of depositors and some funders.
  • DGS covers deposits up to EUR100,000 in the case of a bank failure. 


There are several issues with both funds. For example, DSG funds (national level) will have to run parallel with the EU-wide Eurozone Single Resolution Fund (until the DSG pillar is integrated at a much later date into EBU). This implies serious duplication of costs over time and creation of the 'temporary'  but long-term national bureaucracy / administration which will be hard to unwind later.

By 2016, EA18 euro area members will have national DSG running parallel to EU18-wide single resolution runs (SRM) which cannot be merged together absent (potentially) a treaty revision, not EA-18 EU members will have national DSG and national resolution fund, which can be merged together.

What is worse is that national contributions to DSG cannot count toward national contributions to the resolution fund (SRM or in the case of non-EA18, to national resolution funds). This means that total national banking system-funded contributions to both funds will be 0.8% of covered deposits for DSG, plus 1% for SRM = minimum of 1.8% of covered deposits. Ask yourselves the simple question: given that banking in majority of the EU states is oligopolistic with high (and increasing) concentrated market power, who will pay these costs? Why, of course the real sector - depositors and non-financial, non-government borrowers.

It is worth noting that the 1.0% contribution to the resolution fund will cover not just covered deposits, but actually is a function of liabilities. In other words, it will be much larger proportion of covered deposits than 1%.

That is a hefty cost of the EBU and this cost will be carried by the real economy, not by financialised one. The taxpayers might get off the hook (somewhat - see here: http://trueeconomics.blogspot.ie/2014/04/1742014-toothless-shark-eus-banking.html) but the taxpayers who are also customers of the banks will be hit upfront. And who wins? Bureaucrats and administrators who will get few thousands new jobs across the EU to manage duplicate funds, collections and accounts. The more things change… as Europeans usually say…

Thursday, April 17, 2014

17/4/2014: Toothless Shark? EU's Banking Union


EU has been pushing hard on the road toward the Banking Union (BU) with recent weeks seeing completion of the agreement and vote in the EU Parliament on SRM and other aspects of the BU (see: http://trueeconomics.blogspot.ie/2014/04/1642014-eu-parliament-passes-bail-ins.html). But beyond the facade of all this activity, there is a nagging question of the BU's structural effectiveness. This question is yet to penetrate the thick sculls of investors seemingly obsessed with new issuance of debt and equity by the European banks.

The latest BU shape is much improved on the previous versions: gone are national discretions and in is a new streamlined process with ECB and EU Commission in the driving seat. SRM got an efficiency push with new deadline for completion of funding pushed to 8 years from previous 10 years. The fund will be 60 percent mutualised by the end of year two of its operations. Which further reduces potential for national authorities picking at it while bickering with the EU regulators and supervisors. The SRF will have access to ESM while the funds are being accumulated. And the new version cuts the time required to deploy the Single Resolution Mechanism and the Single Resolution Fund, should the banks run into systemic tight spot. All good.

The bad bits are, however, still there.

  1. The SRF is still only EUR55 billion at maximum capacity. Which is peanuts for a systemic crisis, give euro area banking system has EUR30.5 trillion worth of assets (which means that SRF can cover just 0.18 percent of the euro area assets).
  2. There is no defined mechanism by which banks will be contributing to SRF. Will banks be liable on the basis of their deposits base? If so, the BU will be a de facto mechanism for rewarding less deposits-rich banks and penalising banks that are funded using greater share of deposits. Not a good idea, since alternative to deposits is… err… interbank markets. And a bad idea, because deposits-rich banks are in the euro area's core and in particular - Germany. Alternatively, contributions to SRF can be based on assets. In which case, French, Spanish and peripheral banks are crunched. 
  3. There is little in terms of SRF / SRM promise of breaking the contingent liabilities spilling from the systemic crisis in banking sector onto sovereigns. The only way of doing so is to reduce the rate of crisis spread and probability of crisis becoming systemic. 


The break between taxpayers and banks can only be achieved by creating a highly competitive system of diversified, smaller and better capitalised banks (see: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2329815).

Step one would be to hike minimum leverage ratio (core capital to total assets) to the US standard. Currently we have 3% standard in the EU (http://www.bis.org/publ/bcbs251.pdf) and in the US the ratio is set at minimum 5% for eight biggest bank-holding companies and 6% for the rest of the banking system (http://www.cnbc.com/id/100880857). Given weakness of euro area SRF (pre-funded and capped) compared to FDIC (pre-funded and backed by a stand by loan from the Treasury of USD30 billion, plus a further US Government guarantee to cover any excess obligations) and the heavier reliance of the European system on bank lending, this means leverage ratios of close to 6.5-7% or more than double current minimum.

Step two would be to test the banking system to identify larger banks that will require splitting up and smaller banks that will require capital raising. This will have to be facilitated by forcing new deleveraging targets and supporting equity issuance and forcing mergers in some cases.

Step three will be removing implicit and explicit barriers to new banks entry into European markets and actively promoting emergence and development of alternative banking institutions.


Wednesday, April 16, 2014

16/4/2014: EU Parliament Passes Bail-ins, SRM and MiFID2


So the EU Parliament voted in the three proposals relating to banking sector 'reforms' in the EU. These included

  1. SRM set up - a EUR55bn Single Resolution Fund to be used as the last line of defence in the future banking crises. Here is an earlier note on how effective that will be in stopping bank runs: http://trueeconomics.blogspot.ie/2013/12/11122013-europe-have-any-firepower-for.html You can see recent assessment of the directive by the IMF and myself here: http://trueeconomics.blogspot.ie/2013/03/1532013-imf-assessment-of-euro-area.html
  2. Bank Restructuring and Resolution Directive - a directive that amongst other things sets the first line of defence at shareholders' bail-ins, followed by debt and depositors' bail-ins. That's right, depositors' bail-ins. And do note, the rabbit hole doesn't stop there - see box out here: http://trueeconomics.blogspot.ie/2014/02/1822014-wither-irish-manufacturing-not.html
  3. Bail-ins are now not just 'on the horizon' but are de jure a law. All depositors over EUR100,000 (the maximum amount for which bank deposits guarantee is allowed) will be at risk. The law requires depositors and bondholders to absorb the second hit to the minimum of 8 percent of total bank's liabilities.
  4. As Reuters recently reported, non-performing loans not covered by provisions currently make up ca 1/3 of equity across the top 20 banks in the euro area. And that is after massive waves of deleveraging, recapitalisations and equity rebuilding that took place since 2008, or over the last 5 years plus. Now imagine the likelihood of the next crisis requiring exhaustion of equity to regulatory minimum and subsequent call on depositors. Pretty darn high. You can read Reuters analysis here: http://www.reuters.com/article/2014/04/15/us-banks-tests-provisions-idUSBREA3E07F20140415 and see this handy infographic: http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=2014_04_14_11_05_b27f82d139834fd1a98af554e6aade90_PRIMARY.jpg
  5. In addition to the above, the Parliament also passed the directive establishing the European Securities and Markets Authority - a Paris-based body in charge of regulating trading and other activities in the markets, and the revamped amended MiFID2. This sets up the basic terms for regulating trading in securities and derivatives and contains new rules for trading commodities, OTC derivatives and HFT. ESMA is now empowered to write some 175 new rules to deploy MiFID2 and the proposals for these are due in May. One key area of regulation will cover HF traders, with all market traders requiring to register as either market participants or HF traders, as well as disclose their strategies.



Thursday, April 3, 2014

3/4/3014: In the eye of a growth hurricane? Irish National Accounts 2013


This is an unedited version of my Sunday Times article from March 23, 2014


Russian-Ukrainian writer, Nikolai Gogol, once quipped that "The longer and more carefully we look at a funny story, the sadder it becomes." Unfortunately, the converse does not hold. As the current Euro area and Irish economic misfortunes aptly illustrate, five and a half years of facing the crisis does little to improve one’s spirits or the prospects for change for the better.

At a recent international conference, framed by the Swiss Alps, the discussion about Europe's immediate future has been focused not on geopolitical risks or deep reforms of common governance and institutions, but on structural growth collapse in the euro area. Practically everyone - from Swedes to Italians, from Americans to Albanians - are concerned with a prospect of the common currency area heading into a deflationary spiral. The core fear is of a Japanese-styled monetary policy trap: zero interest rates, zero credit creation, and zero growth in consumption and investment. Even Germans are feeling the pressure and some senior advisers are now privately admitting the need for the ECB to develop unorthodox measures to increase private consumption and domestic investment. The ECB, predictably, remains defensively inactive, for the moment.


The Irish Government spent the last twelve months proclaiming to the world that our economy is outperforming the euro area in growth and other economic recovery indicators. To the chagrin of our political leaders, Ireland is also caught in this growth crisis. And it is threatening both, sustainability of our public finances and feasibility of many reforms still to be undertaken across the domestic economy.

Last week, the CSO published the quarterly national accounts for 2013. Last year, based on the preliminary figures, Irish economy posted a contraction of 0.34 percent, slightly better than a half-percent drop in euro area output. But for Ireland, getting worse more slowly is hardly a marker of achievement. When you strip out State spending, taxes and subsidies, Irish private sector activity was down by more than 0.48 percent - broadly in line with the euro area’s abysmal performance.

Beyond these headline numbers lay even more worrying trends.

Of all expenditure components of the national accounts, gross fixed capital formation yielded the only positive contribution to our GDP in 2013, rising by EUR 710 million compared to 2012. However, this increase came from an exceptionally low base, with investment flows over 2013 still down 28 percent on those recorded in 2009. Crucially, most, if not all, of the increase in investment over the last year was down to the recovery in Dublin residential and commercial property markets. In 2013, house sales in Dublin rose by more than EUR1.2 billion to around EUR3.6 billion. Commercial property investment activity rose more than three-fold in 2013 compared to previous year, adding some EUR1.24 billion to the investment accounts.

Meanwhile, Q4 2013 balance of payments statistics revealed weakness in more traditional sources of investment in Ireland as non-IFSC FDI fell by roughly one third on 2012 levels, down almost EUR6.3 billion. As the result, total balance on financial account collapsed from a surplus EUR987 million in 2012 to a deficit of EUR10 billion in 2013.

Put simply, stripping out commercial and residential property prices acceleration in Dublin, there is little real investment activity anywhere in the economy. Certainly not enough to get employment and domestic demand off their knees. And this dynamic is very similar to what we are witnessing across the euro area. In 2013, euro area gross fixed capital formation fell, year on year, in three quarters out of four, with Q4 2013 figures barely above Q4 2012 levels, up just 0.1 percent.

At the same time, demand continued to contract in Ireland. In real terms, personal consumption of goods and services was down EUR941 million in 2013 compared to previous year, while net expenditure by central and local government on current goods and services declined EUR135 million. These changes more than offset increases in investment, resulting in the final domestic demand falling EUR366 million year-on-year, almost exactly in line with the changes in GDP.

The retail sales are falling in value and growing in volume - a classic scenario that is consistent with deflation. In 2013, value of retail sales dropped 0.1 percent on 2012, while volume of retail sales rose 0.8 percent. Which suggests that price declines are still working through the tills - a picture not of a recovery but of stagnation at best. Year-on-year, harmonised index of consumer prices rose just 0.5 percent in Ireland in 2013 and in January-February annual inflation was averaging even less, down to 0.2 percent.

The effects of stagnant retail prices are being somewhat mitigated by the strong euro, which pushes down cost of imports. But the said blessing is a shock to the indigenous exporters. With euro at 1.39 to the dollar, 0.84 to pound sterling and 141 to Japanese yen, we are looking at constant pressures from the exchange rates to our overall exports competitiveness.

We all know that goods exports are heading South. In 2013 these were down 3.9 percent, which is a steeper contraction than the one registered in 2012. On the positive side, January data came in with a rise of 4% on January 2013, but much of this uplift was due to extremely poor performance recorded 12 months ago. Trouble is brewing in exports of services as well. In 2012, in real terms, Irish exports of services grew by 6.9 percent. In 2013 that rate declined to 3.9 percent. On the net, our total trade surplus fell by more than 2.7 percent last year.

Such pressures on the externally trading sectors can only be mitigated over the medium term by either continued deflation in prices or cuts to wages. Take your pick: the economy gets crushed by an income shock or it is hit by a spending shock or, more likely, both.

Irony has it some Irish analysts believe that absent the fall-off in the exports of pharmaceuticals (the so-called patent cliff effect), the rest of the economy is performing well. Reality is begging to differ: our decline in GDP is driven by the continued domestic economy's woes present across state spending and capital formation, to business capital expenditure, and households’ consumption and investment.


All of the above supports the proposition that we remain tied to the sickly fortunes of the growth-starved Eurozone. And all of the above suggests that our economic outlook and debt sustainability hopes are not getting any better in the short run.

From the long term fiscal sustainability point of view, even accounting for low cost of borrowing, Ireland needs growth of some 2.25-2.5 percent per annum in real terms to sustain our Government debt levels. These are reflected in the IMF forecasts from the end of 2010 through December 2013. Reducing unemployment and reversing emigration, repairing depleted households' finances and pensions will require even higher growth rates. But, since the official end of the Great Recession in 2010 our average annual rate of growth has been less than 0.66 percent per annum on GDP side and 1.17 percent per annum on GNP side. Over the same period final domestic demand (sum of current spending and investment in the private economy and by the government) has been shrinking, on average, at a rate of 1.47 percent per annum.

This implies that we are currently not on a growth path required to sustain fiscal and economic recoveries. Simple arithmetic based on the IMF analysis of Irish debt sustainability suggests that if 2010-2013 growth rates in nominal GDP prevail over 2014-2015 period, by the end of next year Irish Government debt levels can rise to above 129 percent of our GDP instead of falling to 121.9 percent projected by the IMF back in December last year. Our deficits can also exceed 2.9 percent of GDP penciled in by the Fund, reaching above 3 percent.

More ominously, we are now also subject to the competitiveness pressures arising from the euro valuations and dysfunctional monetary policy mechanics. Having sustained a major shock from the harmonised monetary policies in 1999-2007, Ireland is once again finding itself in the situation where short-term monetary policies in the EU are not suitable for our domestic economy needs.


All of this means that our policymakers should aim to effectively reduce deflationary pressures in the private sectors that are coming from weak domestic demand and the Euro area monetary policies. The only means to achieve this at our disposal include lowering taxes on income and capital gains linked to real investment, as opposed to property speculation. The Government will also need to continue pressuring savings in order to alleviate the problem of the dysfunctional banking sector and to reduce outflows of funds from productive private sector investment to property and Government bonds. Doing away with all tax incentives for investment in property, taxing more aggressively rents and shifting the burden of fiscal deficits off the shoulders of productive entrepreneurs and highly skilled employees should be the priority. Sadly, so far the consensus has been moving toward more populist tax cuts at the lower end of the earnings spectrum – where such cuts are less likely to stimulate growth in productive investment.

We knew this for years now but knowing is not the same thing as doing. Especially when it comes to the reforms that can prove unpopular with the voters.




Box-out: 

This week, Daniel Nouy, chairwoman of the European Central Bank's supervisory board, told the European Parliament that she intends to act quickly to force closure of the "zombie" banks - institutions that are unable to issue new credit due to legacy loans problems weighing on their balance sheets. Charged with leading the EU banks' supervision watchdog, Ms Nouy is currently overseeing the ECB's 1000-strong team of analysts carrying out the examination of the banks assets. As a part of the process of the ECB assuming supervision over the eurozone's banking sector, Frankfurt is expected to demand swift resolution, including closure, of the banks that are acting as a drag on the credit supply system. And Ms Nouy made it clear that she expects significant volume of banks closures in the next few years. While Irish banks are issuing new loans, overall they remain stuck in deleveraging mode. According to the latest data, our Pillar banks witnessed total loans to customers shrinking by more than EUR 21 billion (-10.3 percent) in 12 months through the end of September 2013. In a year through January 2014, loans to households across the entire domestic banking sector fell 4.1 percent, while loans to Irish resident non-financial corporations are down 5.8 percent. One can argue about what exactly will constitute a 'zombie' bank by Ms Nouy's definition, but it is hard to find a better group of candidates than Ireland's Three Pillars of Straw.







Thursday, January 2, 2014

2/1/2014: Economics of Christmas


This is an unedited version of my Sunday Times column from December 29, 2013.


December is the month that economic forecasters learn to love and to hate.

They love the role the month plays in the annual aggregates for core economic time series. Get December trends right and you are free to bask in the warm glow of having an in-the-money forecast until the first quarter results start trickling into the newsflow.

They learn to hate a number of things that can make Christmas seasons notoriously volatile, especially around the time when economies switch paths from, say, recession to growth. Miss that moment and your forecasts will be out by a mile for a long time to come. Remember 2008-2009 when all analysts were racing against the tide of real data to update their projections downward? One of the reasons for this was that the peak of uncertainty fell on the last quarter. Secondly, Christmas behavior – by both consumers and businesses – is saddled with deep behavioural biases. This does not make holidays’ data fit well with mathematical models.

Ireland is a great case study for all of the above forces interacting with each other to underwrite our economic fortunes. Take the latest statistics, released last week, covering quarterly national accounts through Q3 2013. While this period does not include holidays shopping season, it is revealing of the strange currents in underlying data. Adjusted for inflation, personal consumption fell 1.22 percent in Q1-Q3 2013 and was down 1 percent in Q3 2013 relative to Q3 2012. In other words, household demand continues to underperform overall GDP and GNP in the economy.

This contrasts with continuous gains recorded in consumer confidence, which rose more than 21 percent year on year by the end of Q3 2013. In fact, the two series have been moving in the opposite direction since the mid-2009.

Some of the reasons for this paradoxical situation were revealed in the recent Christmas Spending Survey 2013, released by Deloitte. Despite the positive newsflow from the GDP and GNP aggregates, consumers in Ireland are more concerned with the state of domestic economy than their European counterparts. Overall, the percentage of Europeans who believe their purchasing power has diminished in 2013 compared to 2012 amounts to 41 percent. In Ireland, the figure is 48 percent. Only 26 percent of Irish consumers are expecting their disposable incomes to rise next year. In core spending cohorts comprising the 25-54 year olds, average proportion of population expecting improved incomes over the next year is even lower.

In other words, it seems to matter who asks the question in a survey and it matters what type of question is being asked. A question about confidence asked by an official surveyor yields one type of a reply. A question about actual tangible income expectations asked by a less formal private company surveyor yields a different outcome. These are two classic behavioural biases that wreck havoc with the data.

Despite the gloom, however, Ireland still leads Europe in terms of per capita spending during the Christmas season. Per Deloitte survey we plan to spend around EUR894 per household on gifts, entertainment and food in the last three weeks of December 2013, down from EUR966 reported in surveys a year ago and down from the actual spend of EUR909.

In brief, we are a nation of confident consumers with pessimistic outlook on the present and the future, who are spending less, but still outspend others when it comes to Christmas. A veritable hell of reality for our forecasters.


But what makes December a nightmarish month for those making a living predicting economic trends, makes it so much more exciting for research economists interested in explaining our choices and behaviour. For them, Christmas is when social mythology collides with reality.

Christmas purchases allow us to gauge the consumers’ ability to assess the value of things. In economics terms, the valuations involved are known as willingness to pay and willingness to accept. The former reflects the price we are willing to pay to obtain a pair of the proverbial woolen socks with a Christmas tree and Santa embroidered on them. The latter references the price we are willing to accept in order to give up the said pair of socks after they are passed to us by our kids with a ‘Merry Christmas, Dad!’ cheer.

In numerous studies, our willingness to accept is substantially higher than our willingness to pay – a phenomenon known as the endowment effect.

Christmas shopping data actually tells us that the endowment effect is present across various cultures. The data also tells us that the sentimental or subjective value attached to a gifted good is not a function of price. In other words, spending three times as much on Christmas festivities and gifts as the Dutch do, does not make Irish consumers any merrier.

But spending more has its costs. Some recent surveys indicate that up to one third of all Irish consumers will take on new debt during the Christmas season. In the Netherlands that figure is around one fifth. And long-term indebtedness is a costly proposition when it comes to social, psychological and financial wellbeing.

On the other hand, intangible quality of gifts matters to the consumers both in terms of giving and receiving. As the result, we tend to form expectations of what others value in gifts we give and we also match these expectation with our personal preferences. This induces series of biases and errors into our choices of gifts we purchase.

In Ireland, books represent top preference as a gift for both giving and receiving. In the majority of other countries in Europe, the matched preferences are for giving cash. Before we pat ourselves on the back for being a literature-loving nation, however, give this fact a thought. Giving cash provides a better matching between preferences of gift giver and gift recipient. In basic economics terms, cash gifts eliminate deadweight losses associated with gift giving. This, in turn, means that in countries where cash dominates physical goods giving, smaller expenditures on gifts achieve better outcomes in terms of recipients’ satisfaction. The reason for this is simple: we say we like something as a gift, but we still end up returning or recycling up to 30 percent (based on various studies) of gifts given to us. Why? Because goods are rearely homogeneous, so our preferences for books do not perfectly distinguish which books we like.

Gifts also have a reciprocal value. Christmas surveys have led us to a realization that the power of ‘give to receive’ thinking works well outside the holidays season as well. For example, charitable donations rise robustly when request for donations is accompanied by a forward gift from a charity. In one study, relative frequency of donations to a charity can rise by up to 75 percent when a gift is included with a request.

Still, research in economics overwhelmingly suggests that Christmas behavior by consumers delivers a significant deadweight loss to the economy and consumers-own wellbeing. In other words, our consumption patterns around Christmas can result in misallocation of resources that are not recoverable through the gains in retail sales, services, taxes and other economic activities. Given evidence from other countries, the deadweight loss from Christmas 2013 to the Irish economy can be anywhere in the region of EUR150-450 million.


Beyond economics of gift giving, popular mythology has it that Christmas is also a period of excess, especially when it comes to food and alcohol consumption. On average, this year, Irish consumers are expected to spend EUR259 on food per household. This is well ahead of the European average and reflects not only differences in prices, but also the level of alcohol consumption and our tendency to bundle food purchases with purchases of alcoholic beverages.

Culinary exploits of the festive season are generally subdued in quality and variety of food, but we make up for it with quantity. Marketing research suggests that the guiding principle to a successful Christmas meal is ‘safe, sound and abundant’ traditional dishes, rather than creative and experimental fare. Thus, virtually all cultures celebrating Christmas have a regulation-issued set of traditions designed to combat the festive season’s calories. These range from New Year resolutions (rarely followed through) to periods of fasting and abstinence (often tried, but rarely verified in terms of health virtues they claim to deliver).

One recent study looked at 54 million death certificates issued in the US from 1979 through 2004. The authors found that “there are holiday spikes for most major disease groups and for all demographic groups, except children. In the two weeks starting with Christmas, there is an excess of 42,325 deaths from natural causes above and beyond the normal winter increase.”

Another medical study found evidence of a significant weight gain in the US population during the December holidays. According to the study, the mean weight increased by 370 grams on average per person during the holidays. This weight gain remained intact during the rest of the year. In other words, all the New Year’s resolutions and health club memberships gifts cannot undo the damage done by turkey and gravy.


Last, but not least, popular mythology ascribes to the economists the definition given by Oscar Wild to a cynic: “A man who knows the price of everything and the value of nothing”. But studies of the Christmas data show that for economists, the size of the gap between sentimental value of the gifts and their retail or market prices is lower than for other professions. It seems, the economists know both the price and the value of Christmas gifts better than other consumers. Sadly, that knowledge seems to be of little help when it comes to understanding what is going on with the Irish economy at large.




Box-out:

The latest instalment in the European banking union saga agreed two weeks ago was heralded by the EU leaders as the final assurance that the taxpayers will never again be forced to shore up European banks in a financial crisis. In reality, the final agreement on the structuring of the Single Resolution Mechanism (SRM) is a sad exemplification of the bureaucratic dysfunctionality that is Europe.

In the US, a single entity is responsible for assessing the viability of a bank experiencing an adverse shock and subsequently determining on the action to be taken in resolving the shock. That authority is the Federal Deposit Insurance Corporation or FDIC.

In Europe, based on the latest agreement between the European Finance Ministers, the SRM will involve at least 148 senior officials across eight diverse decision-making bodies. The resolution procedures can involve up to nine, and at least seven different stages of approval. Majority of these stages require either simple or super-majority voting. The whole process is so convoluted, one doubts it can be relied upon to deliver a functional and timely response to any crisis that might impact Euro area banking in the future.

Is it time we renamed the European Banking Union a Byzantium Redux?