LONDON (Reuters) - Europe should accelerate plans to force investors and wealthy savers to share the costs of future bank failures and define clear rules for these ‘bail-in’ arrangements, ECB policymaker Joerg Asmussen said on Tuesday.
The EU agreed last month on a bail-in plan to target shareholders, bondholders and rich depositors, eager to avoid a repeat of the financial crisis, when its member states spent the equivalent of a third of the bloc’s economic output on saving its lenders.
Asmussen said that under existing arrangements, the bail-in tool could enter into force as late as January 1, 2019.
“This is too late,” he said in a speech to the Atlantic Council at Reuters’ London office. “It means that we have a time gap where the harmonized resolution framework has entered into force ... but one of the key resolution tools is not available to the resolution authorities.”
This could impact the timely and orderly winding up of a bank, he said, adding:
“The European Parliament proposes bail-in to enter into force in 2016. That’s an improvement, but I think January 2015 would be better. Markets will in any case anticipate bail-in earlier.”
Asmussen, a member of the six-member Executive Board that forms the nucleus of the ECB’s policymaking Governing Council, said bail-in arrangements should also be more rules based.
He wants limited flexibility for national authorities when imposing losses from bank failures on investors and creditors.
“The ECB has always argued for discretionary exclusions from bail-in to be limited so that we can make the rules of the game in Europe clear for global investors,” he said.
The ECB is due to take over responsibility for Europe’s new bank supervisor next year and wants a parallel resolution authority set up quickly with powers to wind up failed banks.
The European Commission, the EU executive, will outline its blueprint for an agency to close or salvage troubled banks on Wednesday - the second pillar of a so-called banking union, chiefly in the euro zone.
“A single resolution fund, financed by levies on the whole banking sector and with a European backstop, would be effectively delinked from national budgets,” Asmussen said.
”It is essential that the European resolution authority will be in a position to act swiftly - if needed over a weekend - in order to avoid uncertainty about the course of action with a specific bank.
He said he expected the Commission to move in that direction.
Writing by Paul Carrel, editing by Mike Peacock