ECB’s Draghi Details Banking Bail In Program

European Central Bank President Mario Draghi on Friday called for the early introduction of ‘bail-in’ rules to make creditors share the costs of winding up or rescuing euro zone banks.

He urged banks to use the time before bank test results are published late next year to increase their capital base but said that joint European backstops also needed to be in place.

The message underscores the ECB’s desire that a pan-euro-zone safety net be in place for the health checks but puts it on a collision course with Germany, which wants every country to individually foot the bill for repairing their banks.

Turning to plans to found an authority to wind down failing banks, Draghi said that it would be better to have mechanisms for bondholders to play a role in bank bailouts available right from the start of the single resolution mechanism.

“I therefore support implementing the bail-in tool well before 2018. The sooner, the better,” he added.

European authorities will next year stage a series of exercises to test the ability of its lenders to withstand a future crisis without resorting to taxpayer-funded bailouts.

The tests are billed as the most rigorous assessments the banks have ever had, designed to remove doubts about their health after botched EU stress tests in 2010 and 2011 which failed to reveal major problems at some lenders.

via <a href=”http://www.reuters.com/article/2013/11/22/us-ecb-draghi-idUSBRE9AL0CU20131122?feedType=RSS&feedName=businessNews”>Reuters</a>

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.