Copenhagen, 02/04/2012 (Agence Europe) - The ECB favours a European approach that moves in the direction of a European fund to finance the cost of restructuring failing banks active in more than one country, said ECB Vice-President Vítor Constâncio on Saturday after the ECOFIN Council in Copenhagen. At the meeting, Europe's financial leaders decided on the new crisis management system to deal with banks going bust in Europe (see EUROPE 10586).
Constâncio said that an EU fund would deal with the tricky issue of who pays the cost of bailing out a cross-border bank and would separate off such issues from the sovereign debt crisis and debt in the banking industry. He said such an approach was particularly important within the eurozone because of the higher interconnection in the eurozone financial world.
“Bail-in”. Constancio said that the ECB had always favoured the idea of bail-ins, which was being worked upon within the Financial Stability Board and therefore nothing new. He said that European banks' reluctance to accept the idea was changing. Costâncio said that EU rules were crucial for deciding when such a fund would be used in order to avoid it being abused by decisions at national level.
Unlike bailouts using taxpayers' money, bail-ins would recapitalise failing banks by reducing its debt and enabling it to continue to provide key services in order to protect financial stability. In a statement published after the ECOFIN Council, EU Internal Market Commissioner Michel Barnier said that the bail-in system would make shareholders and lenders responsible for a failing bank, rather than taxpayers through public bailouts. Barnier said there was wide consensus about the need to include bail-ins in the final draft legislation and for this reason, the Commission would be holding consultations for a month with stakeholders directly concerned by bail-ins on how such a system should be introduced, the bail-in-able debt and the timing for the new rules.
Danish Economy Minister Margrethe Vestager said that the bail-in and restructuring fund ideas were controversial among the member states. Denmark has already set up a national system rather like that of the Netherlands, and is very interested in the draft legislation to be unveiled by the Commission in June, ahead of the G20 summit in Mexico on 18-19 June. (MB/transl.fl)