Who guards the guards? In the case of Europe’s banks, the answer is still a work in progress given the faltering efforts to create a banking union.
Today, we interview Jaime Caruana, head of the Bank for International Settlements which said on Sunday that its central bank constituents should not be deterred by fears of market volatility when the time came to start turning off the money-printing machines. That moment was fast approaching, it said.
The big question is why it would not be safer to wait until the world economy is on a sounder footing before turning the money printing presses off, particularly since there is a notable absence of any inflationary threat.
Just before he takes the helm at the Bank of England, Mark Carney will hold a briefing wearing his other hat – head of the Financial Stability Board, the body charged with coordinating international banking regulation. Both he and Caruana could have interesting things to say about the Federal Reserve’s warning that the era of QE is drawing to a close. Both could also have some trenchant things to say about Europe’s banking plans.
Having failed to agree how the bill for future bank failures should be paid, EU finance ministers are scrambling to alight upon a plan and will meet again on Wednesday in an attempt to have something for their leaders to approve at a Thursday/Friday summit.
This was supposed to be in the bag. The more profound elements of banking union are shelved for now. It has been apparent for some time that a bank “resolution fund” with pooled risk has not got a cat in hell’s chance of being created in the foreseeable future, so the “doom loop” of weak banks and sovereigns weighing on each other will not be broken. Berlin will certainly not budge before German elections in September.