A joint statement on euro-area direct bank recapitalization yesterday by the German, Dutch and Finnish finance ministers didn’t contradict a pledge made by leaders of the 17 countries that share the single currency at a June summit, a Finnish official said.
Irish borrowing costs rose after Wolfgang Schaeuble, Jan Kees de Jager and Jutta Urpilainen said the European Stability Mechanism, the euro-area’s permanent rescue fund, “can take direct responsibility of problems that occur” in recapitalization programs under a proposed single bank supervisor, “but legacy assets should be under the responsibility of national authorities.”
The Finnish official reiterated this stance, saying it’s natural that the ESM could only take responsibility for problems that arise after the European Central Bank assumes its role as the single supervisor for euro-area lenders.
In a June 29 statement, euro-area leaders said the ESM could recapitalize banks directly, with appropriate conditionality, once an “effective” single supervisory mechanism is established. The leaders’ statement doesn’t mention “legacy assets.”