|
|
“It would to my mind be a mistake to show weakness of resolve at the first test of bail-in", Sharon Bowles, chairwoman of the European Parliament’s Economic and Monetary Affairs Committee, said by e-mail, referring to rules for creditor losses. “That is not what we expected from the ECB.”
An overly zealous application of the rules, which require junior bondholders to face writedowns before governments can inject capital, “may well destroy the very confidence in the euro area banks which we all intend to restore", Draghi said in a July 30 letter to Almunia [click to enlarge].
In his September 3 reply to Draghi, Almunia said the ECB’s assessment timetable will allow banks that foresee potential shortfalls to raise capital in advance. Regulators may “deviate” from imposing creditor losses in “exceptional circumstances", subject to case-by-case review, Almunia said.
“The Draghi letter is a demonstration of why central banks should never get responsibility over banking resolution", Sven Giegold, a German member of the parliament’s economy committee, said in an interview. “Banking resolution has to be done in accordance with the interests of taxpayers", he said. “We need to move to a much stronger bail-in regime.”
“We made them supervisor to be strong, not just a defender of weak banks", Bowles said.