Euro zone must have backstops before bank health checks: ECB

BRUSSELS Fri Nov 15, 2013 3:13am EST

1 of 2. European Central Bank (ECB) executive board member Joerg Asmussen addresses reporters during a news conference after his meeting with Greece's Finance Minister Yannis Stournaras in Athens August 21, 2013.

Credit: Reuters/John Kolesidis

BRUSSELS (Reuters) - Euro zone governments must put in place ways to financially support their banks in case they need more capital as a result of health checks by the European Central Bank next year, ECB Executive Board member Joerg Asmussen said on Friday.

European Union finance ministers meet on Friday to discuss backstops for banks in time for the ECB's bank asset quality review, the results of which are due in October 2014.

"We will continue to discuss this today," Asmussen told reporters on entering the meeting.

"From the ECB side we always said it is absolutely necessary that we have credible backstops in place before the whole exercise starts, so we need three layers of backstops, these are first private markets, second domestic budgets or domestic bank rescue funds and the third layer is the ESM as it stands," he said.

(Reporting By Jan Strupczewski; editing by Adrian Croft)

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Comments (2)
breezinthru wrote:
Backstops sufficient to cover shortfalls of that magnitude? It is quite impossible without leveraging time.

The first two backstops in most cases will be immediately overwhelmed. It appears that the ESM is only useful as long as no one actually needs it, because the countries whose banks are solvent do really want to subsidize the countries who must subsidize their banks because they are not solvent.

Nov 15, 2013 3:32am EST  --  Report as abuse
pbgd wrote:
The Germans are getting worried. Their banks still sit on billions of worthless paper which they call “capital”. US banks have written off all that stuff years ago.

Nov 15, 2013 6:57am EST  --  Report as abuse
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