Oct 9 A banking union is vital for the proper
functioning of the euro zone and a mechanism to wind down
failing banks should enter into force by 2015, European Central
Bank President Mario Draghi said on Wednesday.
As a first step towards the closer integration of the euro
zone's banking system, the ECB is set to start supervising the
bloc's banks from next year. A single mechanism to wind down
failing banks is in the works.
The EU Commission in July outlined plans to set up an agency
to rescue or shut non-viable euro zone banks, to begin work in
2015 if agreed on by EU states, which would eventually be able
to impose losses on creditors of a stricken bank.
"We trust that a single resolution mechanism will enter into
force by the beginning of 2015," Draghi said in remarks prepared
for delivery at the Harvard Kennedy School, which did not
contain any reference to the outlook for monetary policy.
Banking union was crucial partly because more than two
thirds of firms' external financing came from bank loans, he
Draghi said euro zone countries had made welcome progress in
bringing down budget deficits, noting the average primary fiscal
deficit stood at around 0.5 percent of gross domestic product in
2012 compared to about 6 percent in the United States.
Policymakers gathering in Washington for meetings of the
International Monetary Fund, which Draghi will also attend, have
warned the current impasse in the U.S. Congress over the budget
would pose a major risk to the global economy if it leads to a
U.S. debt default.
Draghi said new European budget rules, including giving the
European Commission the right to inspect national budgets before
they go before national parliaments, conferred "a power the U.S.
federal government does not have over the states."
"We look forward to a full and transparent implementation of
this new regime," he said.