The EU needs fresh powers to wind up failing banks in a speedy push to the next phase of banking union, according to Mario Draghi, president of the European Central Bank, after a landmark agreement on centralized supervision.
The hard-won agreement among eurozone finance ministers on Thursday to appoint the ECB as the “single supervisory mechanism” is just the first, and easiest, step in a banking union plan designed to prevent a repeat of the financial contagion that dragged down banks and sovereigns in the debt crisis.
The next phase – agreeing on a common resolution authority to oversee the orderly winding down of insolvent lenders – is likely to be even more fraught as it implies that taxpayers might have to pay for the mistakes of a bank in another country.
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