Brussels, 28/07/2009 (Agence Europe) - In its response to the Commission's consultation on the European financial supervisory system review (EUROPE 9859), the Italian Banking Association (ABI) said it supported the signing of “preventative agreements for sharing the budgetary responsibility in the different member states during crises” caused by the bankruptcy of a cross-border financial institution. In a press release the ABI declared that the, “amendment of the agreement on 'burden sharing'” contained in the 2008 Memorandum of Understanding (MoU) on identifying, managing and solving cross-border crises, in an effort to make it legally binding and legally clear in advance, so that each cross-border group can fully benefit from the economies of scale and scope economies deriving from centralised management of groups”.
The 2008 amended MoU is exclusively responsible for defining the principle on the crisis caused by the bankruptcy of a cross-border bank (EUROPE 9503). This non-binding document underlines the primacy bestowed on private sector solutions and only envisages resorting to public money when the social advantages of such an intervention exceed the costs of public recapitalisation. These costs will have to be shared between the member states affected by the bankruptcy of the bank in question and calculated on the basis of fair and balanced criteria. The MoU does not provide any more details but in June, the European Council did call on the Commission to present “concrete proposals” on the way in which the future European Financial Supervisory System (a network consisting of three European financial supervisory authorities to be set up, could “play an important role in coordinating the supervisors in times of crisis”. Proposals will have to respect the budgetary responsibilities of the national authorities, as well as the competency of the central banks responsible for providing liquidity to the financial markets (EUROPE 9925). (M.B./trans/rh)