A new euro zone fund for troubled banks will become operational from January as planned because a sufficient number of member states have completed the legal procedures, EU officials said on Monday.

The euro zone's Single Resolution Fund (SRF) was agreed after the 2009-2012 euro zone debt and banking crisis to make sure that in case of new bankruptcies, banks would foot the bill rather than taxpayers. For the fund to be operational, a minimum number of euro zone states had to ratify by Monday the agreement underpinning the SRF.

“The EU’s single resolution mechanism will enter into force as foreseen on 1 January 2016,” an EU Council statement said on Monday, dismissing concerns that there may have been a delay. “It is good news that a sufficient number of member states have ratified so that the new system can start on time,” EU financial services commissioner Jonathan Hill told a news conference.

Italy was the last major euro zone country to complete the ratification procedures, while Greece and Luxembourg are the only two states that have not yet completed the legal procedures, EU officials said.

EU Commission president Jean-Claude Juncker discussed the issue with Greece’s Prime Minister Alexis Tsipras on the sidelines of a EU-Turkey summit in Brussels on Sunday, an EU official said. Tsipras “reassured Juncker that the ratification instrument would be deposited on time,” the official added.

Deadline

The deadline for concluding the process expires at midnight on Monday. If a country misses the deadline, it may not be able to use the new euro zone fund in the first weeks of its operational phases. The fund will be financed from annual contributions from banks, but will only reach its target size of €55 billion after seven years. In the transitional phase, bridge financing will be provided by member states, if needed.

“This marks an important step in completing the banking union and will enhance further financial stability in the euro area,” the head of the fund, Elke Ms Koenig, said in a statement. The banking union is the EU flagship project to strengthen the euro zone financial system.

Under the project, euro zone banks are now monitored by a single supervisor and troubled banks will be resolved in a common way. On Friday, Koenig had raised concerns about possible delays to the starting date of the fund as not enough states had ratified it.

– Reuters