FRANKFURT: The European Central Bank yesterday called for Europe-wide rules for winding up failed banks to be drawn up before it takes over as the region s single banking supervisor.
The so-called Single Resolution Mechanism (SRM) should be established by the time the ECB assumes full supervisory responsibilities late next year, the central bank said in a statement.
European member states are currently trying to hammer out the rules for a new banking union in order to avoid a repeat of the bloc’s banking crisis that pushed countries such as Ireland and nearly Spain into bailouts.
The new regime not only includes a Single Supervisory Mechanism or SRM, which will be housed within the ECB, but also a resolution mechanism or SRM for winding up failed banks.
Both the SSM and the SRM are essential parts of the integrated financial framework of the banking union, which will help break the link between banks and sovereigns in the member states and reverse the current process of financial market fragmentation, the ECB wrote.
The ECB strongly supports the envisaged timeline for the SRM. Under this timeline, the SRM would enter into force by the middle of 2014 and would become fully operational by January 1, 2015, it said.
The scope of the SRM should include all credit institutions in EU Member States participating in the single supervisory mechanism, the ECB argued.
And while it insisted that it was crucial that the supervisory and resolution authorities be kept distinct, the ECB would seek representation in all plenary and executive meetings of the Single Resolution Board as an observer, it said. All EU member states, and not just eurozone members, must agree on the so-called bail-in rules with the EU Commission and the EU parliament by the end of the year.
AFP
