–ECB Stands Ready To Engage In OMTs Should A Country Apply
–ECB Supervision To Be Operational 2014, Legal Framework In Place 2013

FRANKFURT (MNI) – All major countries should promptly implement the
Basel III accord or risk undermining the global banking reform process,
European Central Bank Executive Board member Benoit Coeure said
Wednesday.

While he did not mention the United States by name, his comments
seem to be in line with those made by other European central bankers who
have reacted in recent days to what they view as stonewalling in
Washington over the Basel III guidelines.

Coeure called Basel III a “cornerstone of the G20 reform agenda”
that is “critical” to strengthening the global financial system and
restoring market confidence.

“Delayed implementation of Basel II.5 and Basel III by any major
jurisdiction would weaken the incentives for financial institutions to
comply and also cast serious doubt on the overall reform effort,” Coeure
said in the text of a speech prepared for delivery in Hong Kong.

U.S. regulatory authorities have said they will not be implementing
Basel III as planned by January 2013.

On monetary policy, Coeure reiterated that the ECB stands ready to
engage in sovereign bond buys under its OMT program should a Eurozone
member apply for an aid program with the European Stability Mechanism.
An ESM program with policy conditions attached is a pre-requisite for
bond market intervention by the ECB.

“Let me confirm that the ECB is ready to undertake OMTs whenever a
country has successfully applied for an ESM precautionary assistance
programme, with IMF involvement,” Coeure said.

He repeated that financial market fragmentation was causing
“specific impairments of the monetary policy transmission mechanism”
that had prompted the ECB to act. He said the ECB’s actions – including
the OMT program and the three-year LTROs for banks – were having a
“positive impact on bank funding” and improving liquidity conditions.

Coeure said he expected European leaders to agree on the legal
framework for the single banking supervisor by December, in time for it
to “start legally” in January 2013, but “operationally in 2014,” as the
ECB takes its time to work out the details.

Coeure said the single supervisor should cover “all banks” in the
Eurozone, but he reiterated that “many supervisory tasks – probably most
of them – should be undertaken by national supervisors.”

Coeure also stressed the ECB’s line that common supervision
requires a common bank resolution authority. “I look forward to the
European Commission proposing a single resolution mechanism as soon as
possible in 2013,” he said.

— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com

[TOPICS: M$X$$$,M$$EC$,MGX$$$,MT$$$$,M$$CR$]