'Central command' for banking must be priority -- Noyer
THE eurozone needs a "central command" in both banking and fiscal policy to successfully fight the eurozone crisis, Bank of France Governor Christian Noyer said in Dublin yesterday.
Speaking at the Institute of International and European Affairs (IIEA), Mr Noyer said the process of creating a unified banking supervision system could start quickly -- even by the end of the year as signalled at the last EU summit meeting.
"With strong political will, it can work quickly. I was very reassured by the fact that at the last summit the political will seemed clearly to be there," he said.
A complete banking supervision system would need a resolution fund to finance the winding down of failed banks and a guarantee scheme for their depositors, which would be financed by a contribution from by all banks in the euro area.
Mr Noyer, who sits on the ECB Governing Council, said the euro system of central banks with the ECB at its head, could be the model for the banking union.
"We need a unified supervision, which I see as the same kind of structures we have for the euro system. We know how to make it work," he said.
"The day a Spanish bank can put a big fat sign in its window that says: 'Regulated by the ECB,' the risk of deposit flight declines," Erik Nielsen, global chief economist at UniCredit Bank in London, said.
Mr Noyer's main argument for a banking union was to make ECB policy changes more effective.
He said that while German banks were passing on the ECB's quarter-point interest rate cut to sound customers, and charging around 2pc; Italian banks in similar circumstances had increased rates which were often above 7pc.
He said the "negative feedback loop" between the finances of government and banks also needed to be broken. The same