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REQUISITION OF EUROZONE FINANCE MINISTERS TO SUPPORT INTEGRATED BANKING UNION TO FOSTER FINANCIAL STABILITY 2013

To: The Right Honorable Federal Ministry of Finance Dr Wolfgang Schäuble

From: Athinarayanan Sanjeevraja

Date: June 24, 2013

RE: Requisition of Eurozone Finance Ministers to support integrated banking union to foster financial stability 

Suggestion: We need a truly integrated banking union to foster financial stability

Good Morning Minister. Let me start by paying my respects to you and through you to. “Financial Times, London reported that EU fails to agree on bank bailout rules after nearly 18 hours of negotiation last Saturday morning”. European banks are still in distress because some of the banks still hold large quantities of debt. We cannot force non-euro countries to abide by the same rules as eurozone members because they have no access to the ECB for liquidity. But all eurozone countries should abide bank bail out rule. Why do eurozone finance ministers not willing to share the burden of a bail out? The eurozone sovereign debt cannot be managed effectively at the national level because it is very expensive process when done at national level, it contributes heavily to their sovereign debt burdens and it ignores cross border externalities. Moreover, fiscal position of the many eurozone governments is vulnerable. But financial stability needs fiscal backstop which is politically controversial at eurozone. Thus, national level approach seems highly inefficient.

Minister, we need a truly integrated banking union in which bind rule among national governments to share the burden of failing banks. We have to commit moving towards integrated banking union in which bank regulation and supervision, deposit guarantee and the handling of troubled banks. This would make the single market in European banking substantially more effective. Thus, it would foster financial stability by weakening the link between debt-burdened governments and troubled banks. The essence of burden sharing is that government commit on a voting scheme that determines the bail out decision. It can limit the degree of loss of eurozone sovereignty through eurozone finance minister’s cooperation. If eurozone finance ministers are non-cooperative, the bank recapitalisation policy is inefficient. Thus, it cannot help to achieve eurozone financial stability.             

Minister, I most humbly prayed you as a responsible leader of eurozone member states, implementing the burden sharing agreements can facilitate the efficient resolution of cross border externalities and thus foster financial stability across eurozone.

Minister, please accept, your Excellency, the assurances to support integrated banking union to foster financial stability. Delays always ramp crisis resolution costs upward.   

Sincere Regards,
Athinarayanan Sanjeevraja.   
Athinarayanan Advisory Authority
Athinarayanan Twitter   

Copy to all Eurozone Finance Ministers

1. Austria Finance Minister - Dr. Maria Fekter
2. Belgium Finance Minister - Mr. Koen Geens
3. Cyprus Finance Minister – MR. HARRIS CHR. GEORGIADES
4. Estonia Finance Minister – Mr. Jürgen Ligi
5. Finnland Finance Minister - Ms. Jutta Urpilainen
6. French Finance Minister - Mr. Pierre Moscovici 
7. German Finance Minister - Dr Wolfgang Schäuble
8. Greece Finance Minister – Mr. Giannis Stournaras
9. Ireland Finance Minister – Mr. Michael Noonan
10. Italy Finance Minister - Mr. Fabrizio Saccomanni
11. Luxembourg Finance Minister – Mr. Luc Frieden
12. Malta Finance Minister – Prof. Edward Scicluna
13. Netherland Finance Minister- Mr. Jeroen-Dijsselbloem
14. Portugal Finance Minister – Mr. Vitor Gaspar
15. Slovenia Finance Minister – Dr.  Uros Cufer
16. Slovakia Finance Minister – Mr. Peter Kažimír

17. Spain Finance Minister – Mr. Cristobal Montoro  

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