Weekend Economists Examine (E)sc(h)atology January 24-26, 2014

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71. Euro-Area Direct Bank Aid Ready in March: Dijsselbloem

http://www.bloomberg.com/news/2014-01-25/euro-area-direct-bank-aid-ready-in-march-dijsselbloem.html

Euro-area finance chiefs will complete the rules for direct bank aid from the currency bloc’s backstop in March so the tool is ready when the European Central Bank concludes its assessment of lenders later this year, Dutch Finance Minister Jeroen Dijsselbloem said.

If a euro-zone government can’t deliver assistance to a bank that requests it, “then the ESM can step in with a banking program or direct recap of banks,” Dijsselbloem said today in Davos, Switzerland. “That instrument we will finalize in March, so that will also be available on strict conditions on the outcome of the asset-quality review” by the ECB.

A long-running debate over backstops has direct implications for the success of the ECB’s Comprehensive Assessment of the largest euro-zone lenders, which it will begin to supervise in November. German Finance Minister Wolfgang Schaeuble has warned that allowing the ESM to aid banks directly would require changes to German law.

“The stress test and the asset-quality review must be tough,” Federico Ghizzoni, chief executive officer of UniCredit SpA (UCG), said today on a panel with Dijsselbloem at the World Economic Forum. “And I agree that it would not be accepted by the markets unless we have evidence of some problems to be addressed.”