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Elke Koenig, chair of the Single Resolution Board, which deals
with failures at the EU's top lenders, said targetted changes
were needed to the bloc's rules for failing lenders that aim to
avoid the taxpayer bailouts seen during the financial crisis
over a decade ago.
But there is already a growing debate over whether medium-sized
lenders should face similar requirements as top lenders, meaning
they would have to issue special debt known as MREL that could
be written down to avoid public aid in a crisis, and structure
themselves so they could be shut down smoothly and quickly.
Ignazio Visco, governor of the Bank of Italy, home to many
medium-sized lenders, said in January that most such banks are
not equipped to tap capital markets to issue MREL, and the cost
of issuance could "even force some of them out of the market".
"I would strongly disagree. You can't have banks, call them this
middle class, which are competing in the market and somehow get
an easy way out" Koenig told the European Parliament.
"We need to make these banks operationally resolvable, these
banks need to build up the necessary MREL. This might not be as
much MREL as you might have for a globally systemic important
bank."
Medium and smaller banks come under national rules, leading to
what critics have described as back door state aid.
"We may need to develop proportionate and consistent solutions
to effectively manage the failure of all categories of banks,
regardless their size and business model," the EU's financial
services chief Mairead McGuinness said last week.
(Reporting by Huw Jones. Editing by Mark Potter)
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