Czech Republic should retract its threat to veto the planned banking union in exchange for guarantees from the EU that its banking sector will remain stable. The EU finance ministers agreed on the transfer of banking sector supervision to the European Central Bank this morning. The supervision would start as of March 2014 and include banks with assets worth more than €30bn.
The banking union is primarily designed for the Eurozone, but it can be joined by the states outside the Eurozone. The guarantees for the Czech Republic include conditions under which a subsidiary can be turned into a branch, an important point since more 90 percent of the Czech banks are subsidiaries of Eurozone banks. The Czech government and the Czech National Bank (ČNB) fear that the EU’s banking union would allow Czech banks to be turned into mere “branches” of their foreign owners, making it easier for their owners to drain money away from them.
