Beck, T. and Trebesch, C., (2013), “A bank restructuring agency for the Eurozone – cleaning up the legacy losses”, VoxEU, 18 Νοεμβρίου.
Many Eurozone banks are still in a fragile state following the Global Crisis. This vulnerability will be highlighted as the ECB takes charge of bank supervision, and the EZ moves towards a banking union. This column proposes a Eurozone bank restructuring agency as a way to speed up the crisis resolution. This temporary, centralised agency would be in charge of restructuring viable and non-viable banks throughout the Eurozone. Solving the problem of legacy assets is a necessary step towards a banking union.
At the core of the Eurozone crisis is the deadly embrace between banks and governments. Sovereign fragility has led to pressure on banks’ balance sheets. The weak fiscal position of governments in many periphery countries, on the other hand, has led to delays in recognising bank problems and addressing them (Acharya et al., 2012). The situation, however, also has a political dimension, as regulators in many European countries have become too close to the regulated entities. The combination of regulatory capture and incentives to forebear, exacerbated by easy access to ECB liquidity, has led to further delays in addressing bank fragility.
What to do? The problem of legacy assets cannot – and should not – be addressed as part of the intended framework of a Eurozone banking union. A full mutualisation of banking risks is also not possible and not desirable for political reasons. Currently, there appears to be deadlock between policymakers favoring a centralised solution to the Eurozone banking crisis, and those favoring a country by country approach. Last week’s ECOFIN statement still puts a heavy emphasis on national solutions (ECOFIN 2013a).
As an alternative, we propose a unified Eurozone approach to speed up the long-delayed crisis resolution, by combining elements of centralised control with elements of decentralised implementation. Specifically, following Beck, Gros and Schoenmaker (2012) we suggest the establishment of a central and independent Eurozone Restructuring Agency (ERA) that is in charge of coordinating the restructuring and recapitalisation of viable and liquidating non-viable banks throughout the Eurozone. The agency should be a temporary vehicle, with a clear sun-set clause, so that it ends its duty after the banking union will be completed.
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Σχετικές Αναρτήσεις
- Jordà,O., Schularick, M. and Taylor, A., (2013), “Sovereigns versus banks: Crises, causes and consequences”, VoxEU, 18 Οκτωβρίου.
- Gros, D., (2013), “The European Banking Disunion”, Project Syndicate, 06 Νοεμβρίου.
- Pozsar, Z., (2013), “Shadow banking and the global financial ecosystem”, VoxEU, 07 Νοεμβρίου.