The European Commission next year will propose a common policy for shutting down banks to accompany a plan for a single euro-area supervisor, Financial Services Commissioner Michel Barnier said.
This will follow existing plans to coordinate national bank deposit guarantee schemes, which the EU should agree on in the first part of the year, Barnier told reporters in Brussels today. The proposal for jointly handling failed banks will go further than prior bank resolution programs by spelling out how to share costs.
“The Commission in 2013 will propose the creation of a European resolution authority,” Barnier said. “It’s a complex endeavor but essential to guarantee the efficiency and robustness of the banking system.”
The EU is racing to meet a year-end deadline to agree on a framework for the new bank supervisor. As planned, the ECB will take the lead on oversight of banks in the euro area and other participating nations by 2014.
The European Central Bank urged the EU to speed work on the resolution authority, in a legal opinion on the single supervisory mechanism published today on its web site.
“The ECB is of the opinion that such a single resolution mechanism, focused on a European Resolution Authority, is indeed a necessary complement to the SSM to achieve a well-functioning financial market union,” the ECB said. “Therefore such a mechanism should be established, or at least there should be clear deadlines for its establishment, when the ECB assumes its supervisory responsibility in full -i.e. at the end of the transitional period.”
ECB Executive Board member Benoit Coeure urged Barnier to move quickly with the joint proposals for how to handle and pay for bank stabilization.
“There cannot be a lasting situation with one single supervisor and 17, or more, uncoordinated resolution authorities,” Coeure said in a speech today in Hong Kong. “I look forward to the European Commission proposing a single resolution mechanism as soon as possible in 2013.”
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