Thursday, June 13, 2013

ECB Coeure: Moving from Bail-Out to Bail-In Environment

What is a bail-in vs. a bail-out, you ask?  The bank bail-outs were funded by governments (i.e. tax payers).  Bail-ins will come from bank depositors.  That means YOU.
BERLIN--Europe is currently moving from a bail-out environment to a bail-in environment when it comes to rescuing failing banks, a member of the European Central Bank's executive board said Wednesday.

In designing a common bank resolution mechanism for Europe, European Central Bank policymaker Benoit Coeure said making shareholders and investors, rather than taxpayers, pay for the mistakes made by banks will lead to a fairer and sounder environment.

"Before deciding on the architecture of resolution and recovery, we need to know who's going to pay," Mr Coeure said.

Cautioning that Europe lacks urgency on creating a more resilient central governance and reform to spur growth, the central banker said "it seems like it's going to take decades. This is a worry--we don't have decades."

Separately, Mr Coeure said that central bank independence is under strain in Europe, as "we see a rise of nationalistic temptations everywhere in Europe."

Mr. Coeure made the remarks during a panel discussion at an event on German-American dialogue in Berlin.

He also said inflation expectations for the euro zone are anchored at 2%.

No comments:

Post a Comment