Salgado: Crisis prevention instruments are not an insurance policy permitting banks to take risks
16 April 2010
The implementation of financing instruments that are maintained by the banks themselves, are being considered to design a crisis prevention strategy, Spanish Economy Minister Salgado said and announced that the EC plans to propose an EU resolution crisis framework in October.
The preventative framework studied by the European Union will not constitute an insurance policy for financial institutions "to take risks in the belief that the state will come to their rescue in future crises", said the Spanish Minister of the Economy, Elena Salgado, after chairing the Ecofin meeting.
This is one of the principles considered by the EU Ministers of Economy and Finance, who are assembled for a two-day informal council in Madrid.
The implementation of financing instruments that are maintained by the banks themselves, in the form of fees or taxes, will be another guideline in the design of a crisis prevention strategy.
"We agree with the polluter pays principle", the Spanish Minister emphasised.
At the same time, there has been absolute unanimity in the need for properly calibrated action in regard to the cumulative impact of all these reforms.
In this context, the Ministers stress that these measures should be implemented "allowing for deadlines and momentum" and "avoiding the excessive overload of the financial system that might hinder economic recovery," noted Salgado.
Next to Salgado, the President of the European Central Bank, Jean Claude Trichet, emphasised that the "proper timing of eventual measures" is the "main message of the European central banks".
The Commissioner for Economic and Monetary Affairs, Olli Rehn, said that the bank tax should be levied taking new international capital requirements into account (in reference to Basel III) so as not to cause difficulties for the banking system or for the credit reputation of businesses and families, an opinion reiterated by Trichet.
By July, the European Commission plans to have more details on the performance of the rescue fund so that by October it will have a more specific proposal with inputs from member countries, which will become a legislative initiative in 2011. This, among other measures, will avoid difficulties distributing in profits to share.
