The European Union must be able to wind down failing banks within a weekend, according to Sabine Lautenschlaeger, Germany’s candidate for a vacant seat on the European Central Bank’s governing council.
“So we need a structure where it is possible to start a resolution on Friday night and to finish it on Monday morning at 1 o’clock because then Japan, Tokyo opens. That is a really important requirement,” Lautenschlaeger told a European parliament committee in Strasbourg.
“I don’t have a better solution for you with respect to the structure of decision-making,” she said.
The European banking union is built on three pillars: the European Central Bank (ECB) acts as supervisor for troubled institutions (the Single Supervisory Mechanism); a resolution regime shuts down failed banks (Single Resolution Mechanism); a €100,000 deposit guarantee protects consumers (Deposit Guarantee Scheme).
It seeks to avoid chaotic meltdowns, such as happened in Cyprus where failing institutions almost bankrupted the country and led to a €10bn (£8.35bn, $13.7bn) bailout loan from the European Commission, ECB, and International Monetary Fund (IMF).
It also aims to prevent billions of euros being ploughed into failed institutions to bail them out.
Full article: EU Must Be Able to ‘Resolve’ a Bad Bank in a Weekend (International Business Times)