European Central Bank Executive Board member Benoit Coeure said on Wednesday that the proposed mechanism to deal with bank failures must be implemented earlier than planned.
In a speech delivered in Brussels, Coeure said the Single Resolution Mechanism (SRM) should allow for lean decision-making during emergencies. He also sought "robust and common" resolution financing arrangements.
"In this regard, the period of ten years for moving towards a genuinely common Single Resolution Fund (SRF) is too long and should be shortened, possibly to five years," Coeure said.
"Also, adequate common backstop arrangements need to be established, both for the transition period and the steady state, to guarantee the credibility of the SRF and avoid a persistent or re-emergent sovereign-bank nexus."
He also said that it should be solely the supervisor's job to decide whether a bank is failing or likely to fail.
Coeure noted that Europe is gradually moving towards recovery and financial market fragmentation has significantly receded in the euro area. "What we need now is to create the conditions for a sustained recovery," he said.
The ECB must play a key role in nurturing a "still weak and uneven recovery" and create conditions for sustainable long-term growth, he added.
Eurozone interest rates are set to remain at current or lower levels for an extended period of time, Coeure said. He also asserted that policymakers are absolutely clear that "low inflation is as bad as high inflation".
The rate-setter also acknowledged that financing conditions have improved for previously troubled countries, especially Ireland and Spain. Progress on fiscal and external rebalancing and on structural reforms has also been very significant, he said.
Fuller use of the tools must be made, both at the EU and the EMU levels, to prevent any return to the complacency of the past, Coeure urged.
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