PM ready to block proposal for EU banking supervisor

Prague, Oct 17 (CTK) - Czech Prime Minister Petr Necas is ready to block the establishment of unified bank surveillance in the EU unless disputable proposals threatening the stability of the Czech financial system are solved, Necas said at a press conference after the cabinet meeting yesterday.

Representatives of EU member states are to discuss the bank union at a summit in Brussels on October 18 and 19.

"A total of 95 percent of the Czech banking sector is controlled by foreign parents. This must lead us to being very cautious as regards regulation," Necas said.

"What we want is to ensure guarantees for the domestic sector, and we can therefore hardly agree with, for example, mutual loans. If the banking union was submitted for approval in its current form, we would undoubtedly veto it," he said.

The cabinet considers January 2013 as an unrealistic date for the launch of the surveillance system, Necas added.

The government's goal is only to ensure the stability of the domestic banking sector.

"We are among the three OECD countries that did not have to provide banks with money. Deposits exceed the volume of loans and we have high-quality supervision," Necas said.

Scepticism about unified bank surveillance in the EU was also expressed by the Czech National Bank several times.

The Association of Czech Exporters yesterday called on the government to prevent the Czech Republic's entry in the bank union "by all possible means".

The Czech Republic's inclusion in the bank union could pose a direct threat to the health of leading banks and most export-oriented companies in the country, according to the association.

"Our banks already once went through purification which cost taxpayers over Kc500bn. Stop the situation, that would probably have much worse economic impacts, from happening again," exporters said.

The power of the banking market regulator should remain in the hands of the Czech National Bank, according to exporters.

A bank union could bring the end to the Czech banking sector, they said.

The strengthening of bank surveillance would give the European Central Bank new supervision powers over 6,000 banks in the euro zone, according to proposals of the European Commission. The step should be one of the main pillars of the banking union.

Among the other pillars would be a shared deposit guarantee system and a fund dealing with problems of banks. However, the EC has not presented the proposals of the other parts of the system yet.