Late last night, European Union finance ministers agreed on a new system [4]to centralize control of failing euro-zone lenders - a so-called "bank resolution mechanism" - in the hope that it will stop expensive banking crises from ruining the finances of entire countries.As WSJ reports, ""Taxpayers will no longer foot the bill when banks make mistakes and face crises, ending the era of massive bailouts," according to Michel Barnier, the EU's internal market commissioner." Sadly, Mr. Barnier is incorrect, for two main reasons.
First, in Europe the link between a bank and its sovereign has never been tighter courtesy of ever rising holdings of host sovereign debt by a bank in question (subsequently repoed with the ECB for cash) currently at recordh high levels across the periphery, which means a major bank failure will always result in taxpayer impairment.
Second... well, instead of describing it, we will instead simply show graphically courtesy of the FT [5]just what the "streamlined" bureaucratic process for achieve bank "resolution" in Europe looks like. The numbers in brackets show how many people are involved at any given stage of the resolution process: 148 or so in total.
In a word (or two) - good luck.
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