“We have to accept that some banks have no future,” Nouy told the Financial Times (FT) in an interview published February 10, 2014. Nouy will serve a five-year term. The single supervisory mechanism (SSM) is a regulatory body of the EBC that along with the London-based European Banking Authority, will conduct an asset quality review, and the health of 130 banks that hold about 80 percent of all bank assets in the 18-member currency bloc. The mega-regulator will either close non-viable banks and attempt to re-capitalize weak, yet viable lending institutions by November 2014, when they take over as the region’s bank regulator and announce the results of the stress tests. “I hope that we will be able to resolve to put banks in run-off and not necessarily try to combine bad banks with good banks,” Nouy said. “I do not have any idea of how many banks have to fail. What I know is that we want to have the highest level of quality,” she told FT. The ECB will assess a lender’s key risks, including liquidity, leverage and funding, as well as asset quality and the ability of a banks’ balance sheet to resist stress scenarios. “They may need resolution plans because they have to die in an orderly fashion; that’s very important for financial stability,” Nouy said. The French national was appointed to chair the ECB Supervisory Board in December after a long stint at the Bank of France. “We have to let some banks disappear in an orderly fashion, and not necessarily try to merge them with other institutions. We don’t want banks disappearing in a disorderly fashion, that’s the main point.” Nouy’s message is in step with Mario Draghi, who has previously said some banks need to fail in order for the health check to be legitimate. The tests in 2011 were widely seen as unsuccessful because lenders hugely underestimated their risks. “If they do have to fail, they have to fail. There’s no question about that,” Draghi said in October.
Posted on: Mon, 10 Feb 2014 21:19:05 +0000