The European Commission proposed on Wednesday creating an agency to salvage or shut failed banks, but the absence of an immediate support fund to pay for a clean-up means it may struggle to do its job.
Working with the European Central Bank as supervisor, the new authority is supposed to wind down or revamp banks in trouble. It is the second pillar of a 'banking union' meant to galvanise the euro zone's response to the crisis.
If agreed by European Union states, the agency will be set up in 2015 and will eventually have the means to impose losses on creditors of a stricken bank, according to the blueprint.
But the new authority will be handicapped by the fact that it will have to wait years before it has a fund to pay for the costs of any bank wind-up it orders. In practice, this means it could be very difficult to demand any such closure.
Source: Reuters
