EU Must `Simplify' Bank-Failure Rules After Italy, Villeroy Says

(Bloomberg) -- The European Union should make its rules for failing banks more consistent with those for state aid after cases in Italy exposed the fault lines, Bank of France Governor Francois Villeroy de Galhau said.

“Finalizing and simplifying the resolution pillar should be a priority,” Villeroy said in a speech to the Foreign Bankers’ Association in Amsterdam. “The case of the Italian banks has illustrated just how complex it is to combine the resolution regime” with state aid rules for the “orderly liquidation” of lenders.

Italy is struggling to fix a crisis-era legacy of soured loans weighing on its weak recovery, and is plowing money into troubled lenders in an effort to revamp its banking industry and break a slump in lending. The controversial program highlighted the patchwork of EU and national laws and guidelines that govern the funneling of public money to banks.

The Italian cases as well as the successful resolution of Spain’s Banco Popular Espanol SA also showed that “there is still a need to better coordinate the roles of the different European authorities,” Villeroy said.

The French governor said there may be some consideration to “establish a single banking authority” combing supervision and resolution to “bolster the robustness of the European banking sector.”

©2017 Bloomberg L.P.

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