European Bank Resolution Mechanism Next on the Agenda

On 7 February 2013, Benoît Cœuré, Member of the Executive Board of the European Central Bank (ECB) gave a speech entitled “Central Banking: Where Are We Headed?”

In the main, the speech detailed the way in which the ECB could assume a banking supervisory role alongside its existing monetary policy functions whilst avoiding conflicts of interest.

Mr Cœuré believed that there were actually “desirable synergies” between the two roles.  However, he recognised that the independence of the ECB must be protected and views the creation of well-functioning European bank resolution mechanism as crucial in this respect as it would:

  • limit residual risk to governments’ balance sheets, in particular through the timely implementation of bail-in instruments, and
  • ensure a strict separation between supervision and resolution.

As such, a European wide bank resolution mechanism will be implemented as the second leg of banking union, with 2013 a key year for making progress.

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