MNI BRIEF: Small, Medium EZ Banks Need Crisis Framework: Enria

The euro area needs a harmonised, fit-for-purpose crisis management framework for small and medium-sized banks, the head of the European Central Bank's banking supervision arm said Friday, with "significant" deterioration in banks' asset quality a possibility once government pandemic support measures are lifted. The impact of the COVID-19 pandemic on banks' balance sheets has so far remained limited, Andrea Enria said in a speech, but he cautioned against complacency and said a crisis management framework model similar to the US Federal Deposit Insurance Corporation (FDIC) "is the model to look at."

"Having an effective and integrated framework for managing crises, including for small and medium-sized banks, is essential to preserve the trust of depositors and the public at large, to avoid financial fragmentation and to safeguard financial stability," Enria said.

"[The] mix of tools and financing means available to the relevant authorities needs to be enhanced to adequately deal with the failure of medium-sized credit institutions," he added.