[February 11, 2014]FRANKFURT / LINKOPING, Sweden (Reuters) — Some of the euro zone's lenders have no future and should be allowed
to go under if they fail a health check, the bloc's new banking
supervisor told the Financial Times, underscoring a tougher approach
to banking oversight.
Daniele Nouy told the newspaper that if any of the region's
participating banks fail the European Central Bank's comprehensive
assessment then they could be wound down, and that merging them in
order to save them was not an option.
"We have to accept that some banks have no future," Nouy, head of
the Single Supervisory Mechanism (SSM), told the FT. "We have to let
some banks disappear in an orderly fashion, and not necessarily try
to merge them with other institutions."
Nouy's comments echo ECB President Mario Draghi's speech at Davos in
January, in which he said banks that are found to be unviable by the
asset quality review and stress tests this year should be shut down.
The SSM oversight is part of a push for closer integration of the
banking system to avert future crises. Before it starts its
supervisory role in November it is running the rule over the balance
sheets of the bloc's 128 biggest banks.
The banks will also be put through a stress test to see how they
hold up in shock scenarios. The results will published in October,
showing whether a bank meets a required capital threshold.
"I do not have any idea of how many banks have to fail," Nouy told
the FT. "What I know is that we want to have the highest level of
quality. A failure of a bank may happen."
"We are well equipped to face whatever situation we encounter in the
exercise," she told the paper.
Nouy's appointment comes as the ECB is putting its credibility on
the line after past tests failed to root out problems, notably in
Ireland's banking sector.
ECB is handling the balance sheet review and the stress tests
itself, bypassing national regulators and challenging banks directly
over their figures.
The checks will include subsidiaries of banking groups outside the
bloc, including Sweden's SEB.
Sweden's finance minister Anders Borg said he was not concerned
about the country's banks, but he conceded that some banks in Europe
would be found to not have enough capital.
"If these are smaller regional banks, I do not think this will pose
any significant problem. But you will have to accept that a number
of banks will be subject to a bail-in, or that they will be
restructured," Borg told reporters in the Swedish town of Linkoping.
(Reporting by Eva Taylor in Frankfurt
and Johan Sennero in Linkoping; editing by John Stonestreet and
Louise Heavens)
