Europe should follow its own rules when it looks at the rescue of Italian banks, European Central Bank (ECB) executive board member Yves Mersch said.
“If Europe gives itself rules, then it should also abide by the rules,” Mersch said in an interview on Friday at the Ambrosetti Workshop in Cernobbio, Italy. “That rule respect is a very important element where Europe has to make a little bit more progress.”
The EU has enacted procedures for failing banks meant to end taxpayer bailouts with the so-called “bail-ins.” The new rules came after governments used nearly 2 trillion euros (US$2.12 trillion) in state aid to rescue the financial sector from 2008 to 2014.
Photo: Reuters
In their first test, Banca Monte dei Paschi di Siena SpA and two other small Italian lenders requested a precautionary recapitalization, which funnels government money into solvent banks without sending them into resolution. It also addresses a capital gap in a stress test and imposes lower losses than a full bail-in to investors.
“This is a process that is still under way,” Mersch said. “The ECB is involved from the point of view of supervision, but we have a strict separation between the supervisory side and the monetary policy side.”
The complexity of the ECB’s new role has become clear in recent months. When it declared Monte Paschi solvent in December last year — the first step toward a state-funded rescue — some members of the 19-nation supervisory board were not fully on board, people familiar with the matter said.
Separately, German Minister of Finance Wolfgang Schaeuble wants the European Banking Authority to move to Frankfurt from London, German magazine Der Spiegel reported on Friday, as Britain gears up to leave the EU.
The authority, whose 159 London employees write and coordinate banking rules across the bloc, needs to be relocated after Britain voted to quit the EU, because EU agencies are all based in member states.
Frankfurt, Germany’s financial capital, already has many private banks, its main stock exchange, the German Federal Financial Supervisory Authority, the national bank Bundesbank and the ECB.
This amounts to “a unique selling point compared to other financial centers,” the magazine cited a paper that Schaeuble sent to his colleagues in the cabinet as saying.
“Several attractive properties in a central location are available for immediate use in Frankfurt,” the paper said, also pointing to advantageous transport connections and a skilled workforce in Frankfurt.
Additional reporting by Reuters
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