EC wants a new agency to salvage bust banks
THE European Commission yesterday proposed creating an agency to salvage or shut failed banks, but the absence of an immediate backstop fund to pay for a clean-up means it may struggle to do its job.
Working in tandem with the European Central Bank as supervisor, the new authority is supposed to wind down or revamp banks in trouble. It constitutes the second pillar of a 'banking union' meant to galvanise the eurozone's response to the crisis.
If agreed by EU states, the agency will be set up in 2015 and will eventually have the means to impose losses on creditors of a stricken bank. Officials say the plan foresees tapping banks to build a war chest of £47bn to £60bn but that is expected to take a decade, leaving the agency largely dependent on national schemes in the meantime.
"We have also seen how the collapse of a major cross-border bank can lead to a complex and confusing situation," said Michel Barnier, the commissioner in charge of regulation. "We need a system which can deliver decisions quickly and efficiently, avoiding doubts on the impact on public finances, and with rules that create certainty in the market."