The International Monetary Fund has called for a European “fire brigade” funded by the finance industry to deal with the collapse of banks that operate in several countries.
Managing director Dominique Strauss-Kahn urged the European Union to create a European resolution authority to deal with insolvent banks that would force shareholders and uninsured creditors — rather than taxpayers — to bear the costs of failure. The authority would be funded by the financial industry from deposit insurance fees and levies on institutions, he said.
“What I think is needed is a European resolution authority, armed with the mandate and the tools to deal cost-effectively with failing cross-border banks — an ante-solution to the problems that currently hamper cooperation in crisis situations, rather than an ex-post one,” Strauss—Kahn told a conference in Brussels on Friday..
“It should cover at least the major cross-border banking groups, as well as all banks running large-scale cross-border operations under the single passport.” Such a body could prevent a repeat of the debacle seen after Fortis collapsed in 2008. The Benelux lender had to be bailed out by the governments of Holland, Belgium and Luxembourg, at a total cost of €11.2bn. — © Guardian Newspapers Limited, 2010
