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March 31 (Reuters) – The European Union intends to make it easier to wind down medium-size banks that fail by tapping national deposit guarantee systems for funding, Bloomberg News reported on Friday, citing people familiar with the matter.
The European Commission, in a proposal due in April, would facilitate using the funds to close the gaps at banks that have insufficient funds, as well as avoid tapping uninsured depositors, Bloomberg reported.
Last week, European Central Bank head Christine Lagarde told EU leaders that European banks were safe but called on governments to push ahead with a stalled EU deposit insurance scheme.
“The euro area banking sector is strong because we have applied the regulatory reforms agreed internationally after the Global Financial Crisis to all of them,” Lagarde said, adding that the ECB’s “toolkit” was fully equipped to provide liquidity to the system if needed.
This week, the head of the European Banking Authority (EBA) Jose Manuel Campa warned that the banking sector remained very vulnerable even after measures to stem the fallout of crises at Silicon Valley Bank and Credit Suisse.
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