March 30, 2012 / 3:45 PM / 8 years ago

Euro zone should consider bank resolution fund-Asmussen

COPENHAGEN, March 30 (Reuters) - The euro zone should push ahead of the broader European Union to explore ways to bolster financial stability across the currency bloc and these could include establishing a bank resolution fund, European Central Bank policymaker Joerg Asmussen told Reuters on Friday.

Asmussen, a member of the ECB’s six-member Executive Board, said the euro zone may need to look at setting up such a fund to avoid a bank failure in one country having a ripple-effect across the 17-country bloc.

His comments were theoretical and made no mention of any bank being in trouble.

The 17 euro zone countries have often pushed the agenda for the EU, when proposals did not appear manageable at the level of 27 member states but when unity was crucial within the single currency area.

In December all but Britain and the Czech Republic signed up to a German-led pact with a commitment for stronger fiscal discipline, another step to prevent future financial crises.

“The euro area must dispose of the necessary tools to ensure its smooth functioning,” Asmussen said in comments to Reuters. “The present approach of deeper integration among euro area members within the overall EU framework has worked well so far.”

But if no consensus could be found among all 27 European Union members on deeper integration, the euro zone should make separate arrangements, he said, adding: “This also applies to financial stability issues, notwithstanding the existence of the single financial market.”

“In that specific case, initiatives at the euro area level for enhanced forms of coordination on supervision and crisis management and resolution should be explored. In particular this may include the setting up of a special fund for bank resolution at the euro area level, accompanied by the establishment of a joint supervisory and resolution regime,” Asmussen said.

Asmussen, who has been on the ECB board since the beginning of the year after previously serving as German deputy finance minister, did not detail what form a bank resolution fund might take.

Germany decided last December to resuscitate its bank rescue fund, SoFFin, to help struggling financial institutions through indirect state aid. That fund is unmatched at euro zone level.

Within the European Union, Internal Markets Commissioner Michel Barnier has made an effort to make banks safer but not reached any firm agreement on a pan-European solution.

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