Framework for ESM urgently needed, says Elderfield
CENTRAL BANK regulator Matthew Elderfield said there is an urgent need to establish rules for the European Stability Mechanism or ESM.
"A framework and set of national powers for resolution are urgently needed measures to make banking union a success and to resolve the financial crisis," Mr Elderfield said at a banking conference in Brussels. The Irish Government still hopes the ESM can be used to reduce Ireland's debt burden.
Mr Elderfield, pictured, said officials must agree to some sort of European resolution authority for banking problems and then explore deposit guarantee arrangements.
While many small countries want a new European banking supervisor to guarantee deposits, large countries such as Germany fear that they may end up footing the bill when banks go bust.
While supervision from Europe will help prevent mistakes, it is not enough to rely on outsiders, Mr Elderfield said.
"As an Englishman working in Ireland, I need to disclose that bringing in a foreigner to do your supervision is not, alas, the magic solution to all the woes of a banking system," he joked.
During the same event, the European Union official in charge of regulation said the United States should implement Basel III bank capital rules in the same way as Europe at the beginning of 2014.
"It is essential that the United States and Brazil and Russia apply the same rules that we decided together. It is a condition for world financial stability, not only for the G20, but for global stability," financial services commissioner Michel Barnier told the conference.
The comments confirmed that formal introduction of the rules, forcing banks to roughly triple how much capital they hold compared with pre-crisis levels, will be delayed a year in Europe from the January 2013 start the G20 had agreed.
EU states and the European Parliament are haggling over a law that implements Basel III. Mr Barnier said he expected agreement in the coming weeks. (Additional reporting Reuters)