Brussels, 10/07/2012 (Agence Europe) - On Monday 9 July 2012, Eurogroup made some progress on implementing the decisions taken at the last European Summit into practice, namely integrated bank supervision to pave the way for direct recapitalisation of banks from the ESM (European Stability Mechanism).
Before the beginning of September, the European Commission will unveil proposals for the introduction of an integrated bank regulatory process involving the Eurpean Central Bank (ECB), explained Euro Commissioner Olli Rehn, so that the Council can urgently examine it before the end of the year. This is an ambitious, but realistic, timeframe, commented French Finance Minister Pierre Moscovici, explaining that it would deal with the root of the problem by preventing problems with a country's banks leading to problems with rolling over sovereign debt. France wants direct bank recapitalisation to be retroactive and to be of benefit to Spanish banks. The head of Eurogroup, Jean-Claude Juncker, and Olli Rehn clarified that this type of direct recapitalisation will not require guarantees from the country in question.
“We have agreed that work will also start in September on the preparation for the direct recapitalisation instrument for banks, so that the ESM can adopt this new instrument by regular decision once the Single Supervisory Mechanism is established. Direct bank recapitalisation will enable us to break the vicious circle between banks and sovereign risk”, commented Olli Rehn.
Moreover, “the ECB has signed an agency agreement with the EFSF (European Financial Stability Facility, Ed.), which is another step towards ensuring that our existing instruments can be used effectively and efficiently to stabilise markets”, added Rehn. EFSF Director Klaus Regling said that this would cover deals in the secondary markets and the ECB would be intervening on the bonds markets for and on behalf of the EFSF so the ECB balance sheet will not be affected. (LC/transl.fl)