EU edges towards banking union

This would be far too late for Spain,which could be forced to seek a bailout for its banks if it cannot support lenders saddled with bad property loans and other debt.

“The proposal we have today may be only useful for the future,but it does not solve the current problems we face”,said Sharon Bowles,who chairs the European Parliament’s economic and finance committee and is one of the most influential officials in shaping banking regulation in Brussels.

“In the short term we need further measures,” she said.

The draft law is designed to prevent a repeat of the chaos after the fall of US bank Lehman Brothers in 2008. But Bowles criticised the delay in announcing the long overdue rules,which come almost five years after a collapse in US subprime mortgages started a banking crisis in Europe.

“It’s a shame we didn’t have this years ago,said one banker,who declined to be identified. It’s not going to help Spain,” she said.

Some fear this will exacerbate banks’ borrowing problems if lenders factor in the risk of default.

The EU executive hopes tighter links between winding-down schemes across the European Union will be the basis of a single resolution fund to close or salvage parts of a troubled bank.

If it wins the backing of EU member countries and the European Parliament,the law would be a step in the direction of the banking union championed by ECB President Mario Draghi.

Draghi’s three-pillar plan for banking union consists of central monitoring of banks,a fund to wind down big lenders and a pan-European deposit guarantee.

ECB keeps interest rates unchanged

The European Central Bank left interest rates at 1 per cent on Wednesday,dashing some market expectations that it might move quickly to combat fears about the health of the euro zone. The euro was steady at $1.25 after the decision,Europe’s benchmark stock market trimmed gains,while closely watched German bund future were also little changed.