Christian Clausen, in his role as President of the European Banking Federation, gave a speech at the European Parliament in Brussels. The message was that European banks support the implementation of the so-called recovery and resolution regimes. However, additional steps are needed to succeed in creating a stronger, more stable banking sector.
Christian Clausen, in his speech, addressed the members of the European Parliament and the Committee on Economic and Monetary Affairs, and asked them to keep in mind three key messages when working with the new Directive. First and foremost, establish a set of principles to be used when a bank finds itself in a crisis, to enable quick and efficient action when corrective measures are needed. “And never forget the difference between a systemic bank crisis and an idiosyncratic crisis. If all banks are affected, there will be no possibility of drawing up a detailed solution in advance. Banks in stress cannot be asked to support other banks,” − Christian Clausen stressed.
Secondly, clear and well harmonised triggers will help the regulators govern the behaviour of banks. Nonetheless, leave mandate to bank management to restore business. “No bank wants to be in a situation where shareholders, boards and management are taken out. As long as no 'hard triggers' are breached, management should have the full mandate for restoring their bank. They have the incentives, they have the insights, and it is not possible for anyone from the outside to take faster actions,” – Christian Clausen underlined.
Thirdly, be clear on bail-in to ensure effective solutions. “When a resolution trigger is breached and the authorities take on responsibility for a bank, bail-in is the key. The reason is that it enables a bank's balance sheet to resolve itself, by bailing in liabilities to source new capital. As a result, a newly restructured bank can continue to service its customers, which is crucial in terms of avoiding fresh systemic shocks to the financial systems and the real economy,” − Christian Clausen said.