European Central Bank executive board member Joerg Asmussen has said a future body to handle failing banks must be able to act rapidly in cases of financial turmoil.
“It has to be in a position to take decisions quickly, if needed during a weekend,” Asmussen said during a speech in Berlin yesterday. “The regulation authority must be established quickly. That means there is no time to wait for a treaty change to establish a new institution. The new authority must take a European perspective on financial stability.”
On its website, the ECB called for the future Single Resolution Mechanism to be based around a “strong and independent” authority with a central fund.
Article 114 of the European Treaty can form a possible legal basis for the institution, the ECB said.
That contrasts with German finance minister Wolfgang Schaeuble’s remarks last month that the current European Commission proposal stands on shaky legal ground.
Policymakers are attempting to rework Europe’s financial governance to prevent a repeat of the financial turmoil in the region since 2007.
The European Parliament backed a plan on Sept 12 that allows the ECB to assume supervisory powers over lenders in the 17-nation euro area in November next year.
“In view of the upcoming elections to the European Parliament, it is of utmost importance to have a political agreement on the Single Resolution Mechanism [by the end of this year],” Asmussen said. “It’s obvious” the regulation body shouldn’t be run by the European Union’s council of ministers or the ECB, to ensure “a clear division of labour between supervision and resolution”, he said.
While funds to enable bank restructuring and resolution will ultimately come from levies on the financial sector, Asmussen said Europe’s bailout fund, the ESM, could provide a backstop in the meantime.
“I think the ESM including any non euro-area member states could provide a credit line to the resolution fund,” he said. “That would guarantee a clear control over the resolution fund by the participating member states and their parliaments.”