European Central Bank Executive Board member Benoit Coeure said a single banking supervisor for the euro area should be set up promptly.
“The single supervisory mechanism should be promptly implemented to restore the singleness of euro-area banks’ liabilities,” Coeure said in a speech in Budapest today. It should then be “complemented by a unified mechanism to wind down failed banks,” he said.
European leaders in June agreed to hand the ECB powers to oversee all 6,000 euro-area banks as part of a so-called banking union that would unlock joint recapitalization funds for the region’s ailing lenders. While leaders set a start date of Jan. 1, 2013, ECB Vice President Vitor Constancio is pushing for more time, saying the ECB may not operationally start to supervise banks before 2014.
Referring to the ECB’s unlimited bond-buying program, dubbed Outright Monetary Transactions, Coeure said it will “ease concerns of a euro-area breakup, provided countries make the necessary adjustments.”
“Let me be frank: in some places, trust in the euro as a standard of value has been undermined” by fears of a breakup, Coeure said. “Responses are now in place or taking shape.”
The OMT will not stop the ECB from fulfilling “its primary mandate of medium-term price stability,” he said. “Medium-term inflation expectations are very firmly anchored and the ECB can be trusted to act decisively whenever risks to price stability materialize.”