–Moody’s – ‘Dissonance’ On Bank Union Will Undermine Creditworthiness
LONDON (MNI) – Lack of progress at Friday’s EU Summit on a proposed
EU banking union is a credit negative for weaker members of the euro
zone, writes Moody’s this morning.
At the meeting, the leaders committed only to agreeing the
“legislative framework” for the proposal before the end of 2012.
“However, stark disagreements were apparent in many officials’
post-summit announcements regarding the design, desirability, and
implications of this potential mechanism”, Moody’s noted.
“The continuing dissonance among EU leaders on a ‘banking union’
will continue to undermine sovereign creditworthiness within the euro
area and of stressed countries in particular”.
Moody’s points out that the banking union “is an important part
of a wider suite of planned and proposed changes aimed at strengthening
the euro area regulatory framework”.
“In post-summit interviews, officials from Germany, Spain, France
and Italy offered conflicting views about when the single supervisor
would be deemed ‘effective’ and therefore allow lending from the
European Stability Mechanism (ESM) directly to banks”.
Moody’s says this lack of clarity makes it unlikely that the ESM
will assume responsibility for legacy assets, limiting Spain’s chances
of preventing banking sector recapitalisation needs from affecting its
sovereign balance sheet and diminishing the prospect that Ireland can
expect any relief from its bank support-induced sovereign indebtedness.
Activation of the ESM’s direct bank recapitalisation plan seems
unlikely before the German elections of September 2013, Moody’s says.
–London Bureau; email: ukeditorial@marketnews.com; tel: +0442078627492
[TOPICS: M$$EC$,M$X$$$]
