ECB Policy Maker Pushes For Centralised Resolution Fund To Decrease Risk

Jorg Asmussen, a senior policy maker at the European Central Bank (ECB), has called upon the eurozone to agree on a plan that would allow the process of winding down or paying for insolvent banks to become more centralised. If adopted, the move would decrease fear and treasury concerns about the potential for bank and wider financial supply chain counterparty risk.   

Asmussen said in a speech in the eastern German city of Magdeburg that the declining profitability at eurozone banks was one of the main risks to financial stability, the ‘Financial Times’ reports.  

Mr Asmussen’s standpoint is likely to be met with opposition from within Germany, which has largely been against such a centralised move as the country would be the major funder.  

The German government has resisted any move towards centralisation, Eurobonds or other federalised moves, claiming it violates European Union (EU) treaties by denoting too much power over banks and their assets to the European level. Its constitutional court has already probed the compatibility of the ECB’s existing measures to aid bank stability and the eurozone. 

Mr Asmussen, however, believes the EU needs an authority with the necessary instruments and powers so it can act efficiently and quickly when winding up banks, de-risking the situation. 

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