ECB VP says hard to deal with 'too big to fail' institutions

20th October 2010, Comments 0 comments

European Central Bank vice president Vitor Constancio acknowledged Wednesday that it might be hard to dismantle huge international financial institutions.

They should instead be reinforced so as not to present a major threat to the global system, he suggested during an ECB conference on World Statistics Day in Frankfurt.

"There are not many ways of dealing with this 'too big to fail' issue," Constancio said at the end of a discussion on information requirements for banking supervision.

Major international banking and insurance groups required massive public bail-outs in 2008 and 2009 because it was believed their failures would lead to the collapse of entire national banking sectors.

One reason the crisis occurred was because national supervisors and central banks did not have enough information to identify the threats at an early stage, a situation that needed to be corrected now, Constancio said.

"We need to acknowledge that there are considerable gaps between the existing supply and the new demand for data," he said in his address.

But if central banks and financial sector supervisors amassed and shared enough data in the future they could make such banks "too good to fail," the ECB vice president said.

© 2010 AFP

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