31 May 2012

ECON Committee: Banks and governance top debate with Mario Draghi

Bank troubles and how to solve them dominated the discussion with Mario Draghi in the ECON Committee on Thursday. Mr Draghi stressed the imperative need for a bank crisis resolution system, and admitted that governments should have heeded Parliament's calls for such a system in 2010.

Bank's troubles and how to solve them dominated discussion with Mario Draghi in the Economic and Monetary Affairs Committee on Thursday. Speaking in his capacity as Chair of the European Systemic Risk Board (ESRB), Mr Draghi stressed the imperative need for a bank crisis resolution system, and admitted that governments should have heeded Parliament's calls for such a system in 2010.

Presenting the ESRB's first annual report, Mr Draghi told committee members that current risk levels in the EU were lower than those of November 2011, and that the two key aims should be on limiting contagion and promoting growth and competitiveness.  He also said that the ESRB would be paying particular attention to the banking and shadow banking sectors, and that EU financial legislation needed to reflect concerns of supervisors better.

The banking problem

Many MEPs put questions on this issue. Wolf Klinz (ALDE, DE) asked whether the next best step was to go ahead with a banking union. Mr Draghi agreed, saying however that such a union would be for the eurozone only.

Sven Giegold (Greens, DE) asked whether the whole process of recapitalising Spain's Bankia bank had not been botched from the very beginning. Mr Draghi admitted that issuing very conservative estimates of the cost of a recapitalisation, and then correcting them upwards, "was probably the worst way of doing things. The right decision was taken but at the highest price".

Mr Draghi also reassured MEPs that the ECB would keep open its liquidity lines to all solvent banks and had just begun lending again to four Greek banks, further to their recapitalisations.

Wider governance and role of the ECB

MEPs also asked Mr Draghi for his views on economic governance and a possible new role for the ECB as a way out of the crisis.

Pablo Zalba Bidegain (EPP, ES) highlighted the contrast between the high price being paid by Spain to service its debt and the government's valiant efforts to rein in its deficit. "Are the markets not punishing the general lack of action to protect the eurozone, including the only limited action of the ECB?", he asked.

Elisa Ferreira (S&D, PT) said that bank debt was now a central risk to Member States' economies and their fiscal situations. "How are we going to reform the mechanisms to deal with this bank debt and what role is there for the ECB?", she asked.

Mr Draghi insisted that the ECB could not fill in for Member State governments, or compensate for the lack of eurozone governance. "What leaders need to do is to come with a vision of where they see the euro in a few years time. The stormy currents will remain with us for now but it is time to remove the fog that hides our final destination. This will be the best contribution to lower debt servicing interest rates".

The ECB will continue to work to help banks get out of their debt and deal with their problems but it was not for the ECB to solve their lack of capital and the climate of  risk aversion, Mr Draghi concluded.

Press release

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