While the political leadership of Europe, as can be seen from Macron’s statements, envisages larger pan-European banking schemes, the banking supervisors seem to have started discussing ways to supervise these schemes, which are probably being created.
Bank of Greece (BoG) governor Yannis Stournaras raised the issue of the development of bankruptcy tools in Europe’s banking sector.
In his address to the Conference “Banking Resolution at Ten: Experiences and Open Issues” the governor referred to the banking cases in the US which highlighted that the framework should be flexible enough to allow the authorities to take measures to deal with the failure of medium-sized or even small banks. The reality, Stournaras said, is that the framework for the recovery and consolidation of credit institutions was primarily designed to deal with the failure of large banks.
Transfer tools or combination of strategies
In this context, Stournaras noted, we may need to examine whether transfer tools or a combination of strategies may be more appropriate than the application of the bail-in tool.
Finally, ensuring sufficient liquidity is of utmost importance, he said. Authorities should be ready to provide liquidity, as was the case in the US and Switzerland. On the other hand, authorities and competent supervisory authorities should work with banks to ensure that the latter can quickly mobilize collateral when necessary.
