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Speaking at the House of Lords EU sub-committee, Vítor Constâncio said that the banking union should also concentrate on supervision first - the question of deposit insurance could come later: "My own opinion is that deposit insurance can wait some more time and can come at the end. What is important to ensure financial stability is effective supervision that can detect early on the problems that are emerging in different banking sectors."
On the controversial question of direct aid from the European Stability Mechanism for the recapitalisation of ailing banks, Constâncio made clear that the agreement reached by EU leaders would not allow this to start until 2014. "It delays until the beginning of 2014 any operation of directly capitalising banks." The comment comes as Spain and Ireland push for direct aid for their troubled banks in the face of German insistence that such aid will not cover so-called legacy assets.
Bank of Finland Governor and Chairman of the EU's High Level Expert Group on EU Bank Restructuring Erkki Liikanen defended his report in front of the UK Commission on Banking Standards in London. He told the committee that the HLEG had deemed it important to keep proprietary trading and market making within the sphere of regulation.
But he conceded that the split between retail banking activities and market making/prop trading would face challenges of enforcement. Liikanen noted that in some areas of banking it would be harder to draw the line and that bank governance would require strengthening in order to make sure that the new ringfence be observed.
Georg Boomgaarden, German Ambassador to the UK, was also a witness - view