FRANKFURT--A planned euro-zone system for handling failing lenders should cover all of the region's banks and be in place by the time the European Central Bank takes up its duties as the region's chief banking policeman, the ECB said Friday.
European Union governments have pledged to thrash out a deal on centralizing control of failing banks by the end of the year, but are divided over the scope of what is known as the single resolution mechanism or SRM.
Germany in particular has called for a more limited tool with powers to resolve only the biggest banks. In a legal opinion published Friday, the ECB threw its weight firmly behind the European Commission's plan for an authority with the power to wind down all euro-zone banks.
The SRM should cover "all credit institutions in EU member states participating in the single supervisory mechnism," the central bank said.
Bank resolution is the second leg of the bloc's ambitious banking union project, which aims to sever the toxic link between struggling banks and their governments.
The ECB also stressed that the SRM can be established without changes to the EU's treaties--another concern that has been repeatedly raised by Berlin.
Lawyers for EU member states broadly approved the legality of the commission's plan in September, but urged that more protection be given to national budgets.
Once those changes have been made, "this would make the establishment of the SRM possible without the need for a Treaty change," the ECB said.
It urged member states to conclude their negotiations swiftly, in order to have the SRM up and running by Jan. 1, 2015. Governments should also establish a public backstop to ensure there are sufficient funds for the SRM to carry out its functions as soon as it enters into force, the ECB said.
The backstop "could comprise a credit line granting the SRM access to joint fiscal resources from the participating member states," the ECB said. The money would subsequently be fully recouped from the banking sector, the central bank said.
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European Union governments have pledged to thrash out a deal on centralizing control of failing banks by the end of the year, but are divided over the scope of what is known as the single resolution mechanism or SRM.
Germany in particular has called for a more limited tool with powers to resolve only the biggest banks. In a legal opinion published Friday, the ECB threw its weight firmly behind the European Commission's plan for an authority with the power to wind down all euro-zone banks.
The SRM should cover "all credit institutions in EU member states participating in the single supervisory mechnism," the central bank said.
Bank resolution is the second leg of the bloc's ambitious banking union project, which aims to sever the toxic link between struggling banks and their governments.
The ECB also stressed that the SRM can be established without changes to the EU's treaties--another concern that has been repeatedly raised by Berlin.
Lawyers for EU member states broadly approved the legality of the commission's plan in September, but urged that more protection be given to national budgets.
Once those changes have been made, "this would make the establishment of the SRM possible without the need for a Treaty change," the ECB said.
It urged member states to conclude their negotiations swiftly, in order to have the SRM up and running by Jan. 1, 2015. Governments should also establish a public backstop to ensure there are sufficient funds for the SRM to carry out its functions as soon as it enters into force, the ECB said.
The backstop "could comprise a credit line granting the SRM access to joint fiscal resources from the participating member states," the ECB said. The money would subsequently be fully recouped from the banking sector, the central bank said.
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