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Cross-border banking conference seeks crisis management framework

Monday 29 March 2010 - by Judith Becker

A conference, hosted by the European Commission, on Building a Crisis Management Framework for the Internal Market brought together policy-makers, stakeholders and academics on 19 March to exchange their views on a new crisis management framework for the banking sector.

European Parliament Econ Committee chair Sharon Bowles MEP said that the committee “is already preparing a report responding to the Commission consultation”.

Eliza Ferreira, the rapporteur for this report, stressed that a “forward looking but realistic and balanced approach” needs to be developed that creates “a clear and robust framework, but takes into account the possible burden on the industry”.

IMF managing director Dominique Strauss-Kahn said: “The EU needs an integrated banking system and that this in turn requires an integrated framework for crisis prevention, management and resolution.”

LSE Professor Emeritus of banking Charles Goodhart said that reactive regulation in most cases will not be effective enough, even though he could understand the desperation to regulate after one of the worst crises.


Internal Market Commissioner Michel Barnier said that in most member states the costs of winding up are borne by the state in the absence of crisis resolution funds financed by the private sector.

He said: “This gives rise to the awkward problem of burden sharing between Member States. Not to mention the limits set on the powers of the European banking authority, whose decisions must not encroach on the governments’ fiscal responsibility.

“Is a resolution authority conceivable if the funding issue is not resolved?

“A budgetary safeguard clause is only legitimate in the absence of a European crisis resolution framework. A European crisis resolution framework would mean that in the future there would be few or no bail-outs, but instead orderly bank resolution. Shareholders and unsecured creditors would have to pay. The managers would be held to account. To my way of thinking, financial institutions should contribute to a resolution fund. It is just a matter of thinking ahead, and taking responsibility.”


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