A deal on European banking union was finally struck overnight. Already the inquests have begun into how robust it is.

As we exclusively reported at the weekend, EU finance ministers agreed that banks will pay into funds for the closure of failed lenders, amassing roughly 55 billion euros which will be merged into a common pool in 2025. Yes, 2025.

Until then, if there is not enough money, a government will be able to impose more levies on banks. If that does not suffice, it would put in public money and if that is unaffordable, it could seek a bailout from the euro zone’s ESM bailout fund with conditions and stigma attached.

Germany has secured its insistence that no money from the 500-billion-euro ESM, would be available directly for bank clean-ups.
That deals a blow to a central tenet of banking union as it was originally conceived, namely that weak governments should not be left to cope with banks whose problems can buckle a country. The original plan also called for a mutual deposit guarantee which has long since bitten the dust.

The complexity of the structure is another potential problem since recent history shows authorities have to move fast once a bank is teetering. The European Central Bank will have the power to declare a bank is failing but after that a new agency empowered to shut banks, the European Commission and up to 18 different euro zone countries will potentially have a say.