EU tempers power of agency to shut troubled banks

The European Commission proposed on Wednesday creating an agency to salvage or shut failed banks, but the absence of an immediate backstop fund to pay for a clean-up means it may struggle to do its job.

But the new authority will be handicapped by the fact that it will have to wait years before it has a fund to pay for the costs of any bank wind-up it orders.

In practice, this means it could be very difficult to demand any such closure. Officials say the plan foresees tapping banks to build a war chest of 55 billion to euro 70 billion ($70 billion to $90 billion) but that is expected to take a decade, leaving the agency largely dependent on national schemes in the meantime.