欧州通貨連合のキプロス金融危機の対応などに見られる危なっかしい銀行危機対策
LA CUARTA PÁGINA
Chipre: vivir peligrosamente
La crisis, no resuelta con las medidas adoptadas hasta ahora, pone de relieve que queda mucho camino por recorrer y que hay que extraer las lecciones para avanzar hacia la unión bancaria europea
Xavier Vives 4 ABR 2013 - 00:01 CET
THE FOURTH PAGE
Cyprus: living dangerously
The crisis is not resolved with the steps taken so far, shows that much remains to be done and you need to draw lessons to move towards European banking union
Xavier Vives 4 ABR 2013 - 00:01 CET
The tortuous Cypriot banking problem solving comes to the fore, once again, the fragility of the process of overcoming the crisis in the eurozone. The reality is that this crisis of confidence is repeated until you have established fiscal union, banking union and incentives to align the competitiveness of individual countries. These institutions can not be consolidated without a degree of political union much higher than current direct elections to the leaders of the European Union (EU). The eurozone does not have a unified voice to address a crisis. Even members of the troika (European Central Bank, European Commission and IMF) differ between them. In addition, the president of the Eurogroup, Jeroen Dijsselbloem, added an unnecessary confusion due to their lack of experience in communication.
The final agreement aid to Cyprus, which requires Laiki settlement, one of the failed banks, the restructuring of the Bank of Cyprus, losses for shareholders and creditors, junior and senior, and remove the deposits above € 100,000 policyholders and / or conversion into shares, follows the strictest orthodoxy bank resolution processes. The share capital and the hybrid (as preferred) and subordinated debt are the mattress to absorb the losses. If not enough then you should go to the senior debt and uninsured deposits. In the case of Cyprus is reached important to remove deposits, for its importance in bank liabilities.
The bank resolution process aims to minimize the potential "moral hazard" or too risky bank behavior by controlling shareholders or holders of hybrid capital, subordinated debt, and senior creditors and uninsured deposits. Without this market discipline banks with risky behavior and weak balance deposits could offer high pay and the investor or depositor would not be alert because of the potential risk in the event of problems, public money would respond. This has been the case of Cyprus where euro deposits were paid with a generous ectypes. We have also seen similar behavior in the Spanish banking sector itself. It should be noted, however, that market discipline requires clear and stable rules for both entities and investors. It is essential that an investor or depositor is aware of the risk of its investment to assume.
Capital controls are incompatible with the single currency and are contrary to EU
At the same time, the claim implicitly or explicitly guarantee all bank liabilities leads to a bill to the taxpayer that may exceed the fiscal capacity of the state, as the cases of Ireland and Spain itself, and to reinforce the loop between sovereign risk and bank risk. The first reaction of governments to the banking crisis was trying to protect at all costs to creditors of banks. Given the impossibility of doing so, different countries, chronologically, Ireland, UK, Denmark, Spain and the Netherlands-have had to admit losses for holders of preferred and subordinated debt. In rare cases, Ireland and Denmark, it was imposing losses on senior debt or deposits above a certain threshold. In case (end) of Cyprus has taken a step further.
It has been argued that market discipline to senior bondholders and uninsured depositors may cause panics or domino effects between entities. However, this argument may be contrasted is best recapitalize, if necessary, for the entities concerned to prevent systemic effects, and the panic of depositors are removed with deposit insurance, always with a clear boundary and inviolable. The troika, at the request of the Government of Cyprus, was wrong to include deposits of less than 100,000 euros in acquaintances in the first proposed solution. The Cypriot government proposed it would compromise the offshore banking business, with large deposits, but the troika should never accept it because it contradicted the policy of European deposit insurance. Directive on the other hand, it needs today is supported by national funds in the absence of a guarantee fund of European deposits.
Did this resolve the crisis in Cyprus? No, because Cyprus is imposing capital controls to prevent leakage of deposits. The problem is that these are incompatible with the single currency and contradict one of the foundations of the EU, the free movement of capital. Brussels's insistence that the controls are compatible with the EU Treaty sets a dangerous precedent. OK capital controls is to undermine the single currency and the EU itself. The flight of deposits can be controlled with decisive action, and manifest, by the ECB to ensure liquidity to banks amounting Cypriot capital outflows if banks are solvent and able to provide adequate security. And while respecting the promise of insurance for deposits up to 100,000 euros. If the ECB doubt the creditworthiness or collateral provided by Cypriot banks, then additional European funding will be required ... or Cyprus should leave the euro.
This crisis indicates how urgent it is to advance the banking union. The foundations of the banking union, raised in June 2012, are the supervision of banking institutions by the ECB, adopted in December 2012, uniform rules of supervision, control and entity resolution, and in the future, a unique mechanism of resolution and deposit insurance system integrated. There are two proposed EU directive on bank resolution and deposit insurance, which should be approved this year. The resolution policy introduces the priority of creditors for bankrupt entity on the model outlined above. Includes potentially both junior and senior creditors as uninsured deposits. However, it indicates that the deposits should be the last resort to absorb losses. The aim is to protect the taxpayer and maintain financial stability and market discipline.
Capacity is needed to recapitalize European funds for system stability
The loop between sovereign risk and bank risk is softened resolution mechanisms involving bank creditors. However, the ability to direct recapitalization of entities using European funds is necessary to maintain system stability. The European decision conditioned June 2012 establishing a European supervisor. The ECB will assume this role in 2014, but Germany, Netherlands and Finland believe that direct recapitalization should not be applied to legacy assets. At the same time, these countries do not want the system to give European deposit insurance guarantees to depositors of a country with mutual funds but with national funds mutual company. As for Cyprus shows, today, the guarantee of deposits in a country is as good as the creditworthiness of the sovereign. Certainly, this interpretation prevents moral hazard, but it severely limits the ability of European funds to address potential systemic risks. The balance between both risk control is very delicate. European funds should be an effective tool to share but only ultimately should intervene and prevent systemic risk.
The European Commission should present this year a proposal only resolution mechanism should contain a centralized European authority resolution. This authority should obtain funds of the same financial industry and the European taxpayer, if necessary. The question is where to file this authority. One possibility is to reside in the European Commission but the funds come from the European Stability Mechanism (ESM). In the future, we may adopt the U.S. model
Xavier Vives is Professor of IESE.
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