A European banking union with joint liability cannot be put off much longer.

That happened because European bank regulation is still characterized by a race to the bottom.

And a fragmented European banking system remains one of the weakest links in the regional daisy chain.

It could agree to swift bank recapitalization, a banking license for the European Stability Mechanism, and a more expansionary ECB policy.

If the idea of a European banking union is serious, now is the moment to advance it.

But the European Banking Federation has dug in its heels, describing the recommendations as completely unnecessary.

It will be making specific proposals during the Conference.

Credibility The eurozone s new banking supervision mechanism will have the ECB at its heart.

First, the identity of the single European banking supervisor remains undecided, and the ECB has seen an opportunity for a power grab.

Banking supervision was not included among the ECB s objectives, though one article of the treaty gives the system of European central banks as a whole the task of contributing to effective supervision.

Likewise, common European banking supervision will not suffice to prevent the continuing exodus of funds from the afflicted countries.

Easy ECB liquidity is now sustaining a vast swath of Europe s banking system.

Second, an agreement on authorizing the ECB to oversee the banking sector was reached at the end of last year.

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Moreover, the ECB already bears de facto responsibility for the stability of the eurozone s banking system.

Greece s public debt was placed in its own banking system, which is indebted to the European Central Bank via the issuance of euros.

The Committee has also received messages from the European Union and the Organization of the Islamic Conference.

When that phrase was inserted in the Treaty, it appeared as if the hurdles to effective European banking supervision could hardly be set higher.

Every week more liquidity is injected into the global banking system by the United States Federal Reserve and the European Central Bank.

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Messages were received from the European Union and the Secretary General of the Organization of the Islamic Conference.

At the same time, the European Central Bank unleashed its 1 trillion ( 1.3 trillion) long term refinancing operation, which pulled the European banking system back from the brink.

This is clearly the belief of the European Central Bank, which is pumping hundreds of billions of euros into the banking system to ensure liquidity.

Indeed, the drafters of the ECB statute produced an astonishingly far sighted approach to banking supervision.

MUNICH For a while, it looked as if the European Central Bank s 1 trillion credit program to pump liquidity into Europe s banking system had calmed global financial markets.

But the European Union collectively has roughly 30 of the votes at the IMF, and can effectively veto a more forceful approach to the European banking system.

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The emerging banking union is not only the first step toward a European fiscal union it is also the final step toward completing the European common market.

The European Central Bank has been more thoughtful, though no less enthusiastic, arguing that a banking union should have three objectives.

This heightened uncertainty could spill over to economic activity in the rest of the European Union through adverse feedback loops between sovereign risk and the banking system.

Europe s banking system remains sickly, even though many national governments have gone to great lengths to hide their banks woes.