Locking up the money of unsuspecting depositors to prop up collapsing banks.
The European Central Bank (ECB), arguably the European Union’s most powerful and least accountable institution, apparently needs more power, according to Daniele Nouy, the ECB’s top supervisor. Chief among the fresh powers it seeks is the power to temporarily prevent people from withdrawing their money from their accounts at banks that are in distress, including by electronic fund transfers.
“In my view… the introduction of adequate moratorium power for authorities is needed in order to react with the needed flexibility, if the situation of a bank deteriorates rapidly,” Nouy told a member of the European Parliament in a letter. “Given the potentially swift evolution of liquidity crises, a moratorium tool could be necessary to ensure there is adequate time for ensuring a credible solution,” Nouy said, adding that the ECB will soon publish an opinion on this issue.
The recent collapse and resolution of Spain’s Banco Popular and Italy’s Monte dei Paschi di Siena lent more impetus to this new regulatory push that has been quietly in the works for a while.
Late last year, the European Commission, the same entity that wants to impose increasingly draconian limits on the use of cash in Europe, proposed giving banking supervisors the authority to suspend some deposit withdrawals and payments obligations in exceptional circumstances.
But not even that was enough to placate Europe’s senior ranks of central bankers…