Tuesday, February 21, 2012

12 Eurozone leaders call for allowing banks to fail

According to a Washington Post article, a dozen Eurozone leaders have called for ending the implied guarantee of banks and allowing banks to fail.

Regular readers know there is one simple way of accomplishing this:  requiring banks to provide ultra transparency and disclose on an on-going basis their current asset, liability and off-balance sheet exposure details.

Combining this information with existing deposit guarantees and access to central bank funding when pledging good collateral, banks can be held fully responsible for bearing the costs of the risks they take.

“We meet in Brussels at a perilous moment for economies across Europe,” the leaders said. “Growth has stalled. Unemployment is rising. Citizens and businesses are facing their toughest conditions for years. “ 
The letter urges European nations to deregulate their service, research and energy sectors, forge trade ties with growing markets including China, Russia and South America — and even contemplate a free trade agreement with the United States.... 
It also suggested that faltering banks could be allowed to fail. 
“Implicit guarantees to always rescue banks, which distort the single market, should be reduced,” the letter said. “Banks, not taxpayers, should be responsible for bearing the costs of the risks they take.” 
Please look at who signed the letter!
The letter is signed by the leaders of Britain, Ireland, the Netherlands, Italy, Spain, Estonia, Latvia, Finland, Sweden, Poland, the Czech Republic and Slovakia.

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