At the EC conference “Building a Crisis Management Framework for the Internal Market” he stressed that the key question is how to limit pure financial “game” in markets and the potential abuse of market power.
He presented the three areas where the debate on crisis management is focused:
· First, in the area of early intervention the enhancement of cooperation among supervisory authorities is important, when they address an ailing cross-border financial institution. It can be improved by achieving convergence as regards a minimum set of tools available to the supervisory authorities involved. This may require also a common terminology as regards for instance the types of reorganisation measures to be used for financial institutions.
· Second, as regards bank resolution, a priority is to pursue an enhanced and more coherent framework for the action of supervisory and resolution authorities. To avoid moral hazard, authorities should be ready to intervene with appropriate actions to contain the possible impact on financial stability and, where appropriate, ensure an orderly winding-up of the affected financial institution.
· Third, as regards insolvency proceedings, new initiatives are required to promote further harmonization at the EU level. Today, national legal regimes are still diverse in terms of the rules and procedures that apply. It is recognised that harmonization at EU level may be difficult to achieve, but it should be underlined that it is key in any crisis resolution. Therefore, utmost efforts should be devoted to assessing outstanding problems and identifying possible ways forward. The ECB strongly supports the recent establishment by the Commission of a group of experts to pursue this aim.
A key priority in terms of enhancing the resilience of the CDS markets is the establishment of central counterparty facilities. Such CCPs will help, in particular, to diversify and share risk exposures and their margining procedures will reduce the incentive to take excessive risks. Moreover, CCPs will deliver more of the much needed transparency for all parties involved.
He concluded by saying that “going forward, we need to strengthen longer-term confidence, and that requires policy frameworks that will be robust against future challenges.”
© ECB - European Central Bank
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