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Coeure said the resolution mechanism was only way to break that vicious circle because it takes the financial burden off governments. When it becomes supervisor, the ECB will have the power to yank bank's licenses. But the job of taking action over a failed bank would remain with the resolution agency. It could write off what the bank owes to its creditors, known as a bail-in, or convert those debts into shares in a restructured bank, for instance. That would find money to get the bank going again without tapping the public treasury and making taxpayers pay. Coeure said the resolution agency would need its own pot of money to finance bank restructuring, but that money would be raised ahead of time by a levy on banks. He said the recent experience in bailing out eurozone member Cyprus showed the need for clear rules and powers on winding up banks. The legislature in Cyprus had to hastily pass legislation allowing restructuring of its troubled banks. The turmoil unsettled markets and has weighed on business optimism, adding to the burdens on the eurozone economy as it struggles to leave recession return to growth. "Any solution which does not imply an outright bailout seems to take creditors and markets by surprise. This will need to change," Coeure said. "I would say that after the events of Cyprus, markets should be convinced that Europe is serious and committed to bailing in and thus ending the bailout culture."
[Associated
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