PARIS (MNI) – Creation of a Eurozone banking union must not focus
solely on collective regulation and control but also resolve the issue
of liability, European Central Bank Governing Council member Klaas Knot
said Friday.
Control and liability “should go hand in hand and move in tandem to
the European level as much as possible,” the Dutch central bank governor
told a conference here.
In order to clear up uncertainties about problems in banks’ balance
sheets, there must be a “very thorough asset quality review” at the
outset, he said. “Let’s first have the information on the table.”
Only then should the discussion begin over “who pays for what,”
Knot said, stressing the importance of “bailing in” those responsible as
well as “bailing out” problem banks. Losses should be covered mainly by
shareholders, including senior shareholders, with some extra money to
cover “tail risks,” he argued.
On the control side, national supervisors should be part of a
single supervisory mechanism with a single “line of command,” Knot
said. At the top, the ECB should have the right to extract individual
cases from national authorities if needed, he said.
Due attention must be paid to the separation of monetary policy
from bank supervision, not least to assure the credibility of monetary
authorities, Knot said.
Even the best supervision faces “downside” risks when “shit
happens,” he said. “Every now and then your reputation is dented.” But
this must not spill over to the reputation of the ECB.
–Paris newsroom +331 4271 5540; Email: ssandelius@mni-news.com
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