New eurozone banking union should include emerging Europe - EBRD

The proposals to unify bank supervision and to harmonise bank resolution mechanisms were large steps in the right direction but they remained incomplete by limiting full membership to eurozone members and by maintaining resolution authority at the national level, the EBRD said in its Transition Report 2012.

According to the EBRD, this had raised concerns that banks headquartered outside the eurozone would be disadvantaged.

"Non-eurozone countries should be allowed to opt into both the supervisory mechanism and the European Stability Mechanism," it said, adding that banking union should be extended to include European countries that either could not or did not want to become full members as this could allow them to benefit, for example, from conditional liquidity support from the European Central Bank.

“The report also highlights concerns that the proposed eurozone-level supervisor might not pay enough attention to local problems, particularly in the smaller countries. To address these concerns, individual countries should be given sufficient voice in the governance of the single supervisory mechanism,” the EBRD said.

To improve cooperation between home- and host-country authorities of multinational banks in areas not covered by the single supervisor, such as the resolution of failing banks, the EBRD proposes cross-border stability groups that would also include finance ministries.