Monday, February 23, 2009

Kroes - The Road to Recovery

Posted by D. Daniel Sokol

Neelie Kroes gave a speech to the OECD's 105th meeting of the OECD Competition Committee on The Road to Recovery.   Among her points:

A middle way would be to have regulators to require full and frank disclosure from all banks to be able to direct their interventions to systemically relevant banks most in need of it.

Proposed schemes will need to be sustainable from a budgetary perspective, and the budgetary position may affect the type of scheme chosen.

Consideration of the medium and long-term impact must be built into the design of impaired asset schemes.

They must not inflict damage on other market players and will need to be

  • timely (available during a short window),
  • targeted,
  • and transparent.

And, where necessary, accompanied by a restructuring of the bank to the extent necessary to ensure not just viability - in the sense of survival - but real ongoing utility as a means of channelling credit to the economy.

This leads me to my most important point.

Guarantees, recapitalisation and the treatment of impaired assets are necessary, but they are not sufficient. 

Tough decisions on restructuring or possible managed liquidation need to be made, and they need to be made very fast.  We cannot afford delay.

Member States have to be resolute and determined to reduce uncertainty and increase trust in the banking system so that the real economy can again access the credit that it needs.

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