This policy note was published last Friday by the European Parliament in anticipation of their "Monetary Dialogue" hearing of ECB President Mario Draghi yesterday (other papers prepared for the same occasion are here). It was republished today by Bruegel and the Peterson Institute in their respective policy series. The content of the three versions (European Parliament, Bruegel, and PIIE) is identical.
In the note, Guntram Wolff and I provide an in-depth analysis of the sequence defined by the European Council in mid-December to complete Europe’s banking union, starting from the first step of creating a Single Supervisory Mechanism (SSM) hosted by the European Central Bank. We make specific recommendations on the successive steps, including the finalization of the SSM Regulation, other pieces of EU legislation (Capital Requirements Regulation, Bank Recovery and Resolution Directive, Deposit Guarantee Schemes Directive), the operational framework that will enable the European Stability Mechanism to recapitalize banks directly, the future “Single Resolution Mechanism” that is intended for discussion later this year and in 2014, and further steps at an even later stage.
We also make the point that policymakers should take decisive action to restore trust in the European banking sector before the Single Resolution mechanism is finalized, because the economic cost of waiting at least 18-24 more months would be simply too high. Article 27(4) of the SSM Regulation in particular provides a unique opportunity for a proactive, system-wide initiative for the assessment and restructuring of Europe’s banks in late 2013 / early 2014.
The note was presented to the press this morning. Click here to listen to the conversation as recorded on the Peterson Institute's website.