EU bailout fund 'must cover bank rescues'
Making the euro area's bailout fund responsible for the cost of bank rescues is "essential and urgent", the Deputy Governor of the Irish Central Bank, Stefan Gerlach, has said.
"It is, of course, essential and urgent to enable the ESM to support banking systems in order to overcome some of the tensions in the euro area," he said.
He spoke as Michael Noonan and finance ministers from across the euro area met in Brussels to debate the details of how ESM rescues of banks will work.
Action on the creation of a banking union had been uneven since October, Mr Gerlach said, and he admitted that there were tensions among the euro-area players.
"Of course it is difficult to build consensus in a situation where bank resolutions may become necessary, and deposit insurance schemes could be called on, in the near future," he said.
"This is a matter that ideally should have been discussed and settled. Unfortunately, that route was not taken."
He made the comments in a speech at the European University in the Italian city of Florence.
In October, European political leaders agreed to create a new common European banking supervisor, linked to the European Central Bank, to oversee banks on a cross-border basis.
It is regarded by many as the first step towards banking union, and has been the focus for policy makers in recent months.
A new single supervisor would be freer from political interference than traditional regulators but would work best if they worked alongside existing central banks and benefit from local knowledge, he said.
However, successful banking union also depended on being able to close failed banks without causing a crisis in future, and a scheme to guarantee deposits were just as important as the supervisor, he argued.
"The benefits of a resolution framework and fund in ensuring that taxpayers are insulated from the direct costs of resolving banks are clear," he said.