European Union governments should work out a system for sharing funds in the event of a bank collapse or other international financial crisis, Monetary Affairs Commissioner Joaquin Almunia said.
The EU has „very substantial shortcomings” in bank supervision, Almunia said at a conference in Brussels yesterday. Practices differ country by country, he said, and governments have no binding agreement on who foots the bill in case of a need to bail out bank deposits or take other action to stem a crisis. „The allocation of any possible budgetary costs in managing or resolving a cross-border financial crisis would rely solely on the voluntary behavior of member states,” Almunia said.
„The ministers and the governors cannot react the same way” that they would have „five years ago.” Financial regulation must catch up to the increasing integration of European markets, with a growing number of banks acquiring rivals and doing business abroad, Almunia said. Andrew Crockett, president of the international arm of JPMorgan Chase & Co., said in a speech at the conference that the rules on insolvency haven't been updated since the 1991 collapse Bank of Credit and Commerce International (BCCI). „It would be useful to have a common European approach,” or global approach, on bankruptcy procedures, Crockett said in an interview. (Bloomberg)