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Thursday 24 July 2014

Weidmanm insists EU regulator won't help cut Irish debt

Thomas Molloy

Published 20/11/2012|05:00

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'Mistakes' are on 'national level'

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A senior German official once again poured cold water on Irish hopes that a single banking regulator could pave the way for a deal on reducing Ireland's national debt.

Bundesbank president Jens Weidmann said yesterday in Frankfurt that he did not believe that the proposed banking regulator for Europe's 6,000 banks should be allowed to help banks which have already been bailed out by national governments.

"The current problems in the banking system are above all a result of past mistakes on the national level," Mr Weidmann said.

"Balance-sheet risks that occurred under national resp-onsibility must also be overcome by the respective member state."

Mr Weidmann, who sits on the governing council of the European Central Bank, echoed the views of Chancellor Angela Merkel and Finance Minister Wolfgang Schaueble who have also made it clear that they do not believe the new regulator should be able to use the European Stability Mechanism to pay for bailouts which have already occurred.

Dr Merkel's views angered the Irish Government which later published a statement on behalf of both countries saying that Ireland was a unique case.

Mr Weidmann opposes the ECB's recent bond-buying stimulus package. Europe's most powerful national central banker added yesterday that the introduction of a regulator for European banks "cannot solve the current crisis".

Expectations

In an apparent reference to Ireland and Spain, he added that some countries' expectations they could wipe out losses "threaten to delay the reform process in the banking system".

Hopes of establishing the new system for the 17 countries that use the euro have quickly faded, with Germany in particular insisting it needs thorough preparation.

Mr Weidmann said that a regulator shouldn't be introduced "over-hastily."

Finance Minister Michael Noonan has conceded that a deal on Irish bank debt is unlikely before a regulator is in place.

Recently, Mr Noonan questioned for the first time whether the ESM was the best mechanism for saving the banks.

And Mr Weidmann also called on Germany to have a strong voice in Europe's planned banking union, adding that the ECB's new banking supervisory role must be clearly separated from its monetary policy mandate.

Mr Weidmann also said that banks should limit their exposure to government debt by backing up their sovereign debt holdings with sufficient capital and by introducing a cap for how much money a bank can lend to a state.

ECB executive board member Benoit Coeure, speaking at the same conference, stressed that the ECB should supervise not only the top banks, but all banks, warning that restricting the ECB's scope could result in a two-tier system of banking.

Irish Independent

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