European Central Bank President Mario Draghi said on Monday that the euro-zone should quickly establish a joint fund to restructure and resolve failing financial institutions, adding that the move is necessary to stabilize the region’s financial system.
Draghi said that the fund should be subsidized by fees on financial institutions in order to guarantee the safety of taxpayer money and that “resolution costs are first and foremost borne by the private sector,” U.S. News & World reports.
Additionally, Draghi said that the fund should be able to make crucial decisions about the future of a troubled bank, minus individual national concerns, in order to shatter the “perverse link between sovereign and banks,” referring to the drag that troubled banks have put on euro-zone economies, according to U.S. News & World Report.
The idea of a joint fund, however, has been met with criticism from Germany, the largest economy in Europe, where politicians have voiced concern that the country will be financially responsible for bailing out failing banks in other nations.
EU leaders have requested that the European Commission, the executive division of the European Union, draft a proposal for the fund because of the uncertainty surrounding its operations and implementation, U.S. News & World reports.
Draghi said that the fund is necessary to establish a banking union after the ECB assumes oversight of the region’s banks, which is expected to take effect next year.
“We have to find the proper equilibrium between national and centralized supervision,” Draghi said, according to U.S. News & World report.