It helps to handle such failures in a timely and orderly manner. Therefore, moratorium powers should be part of the European toolbox. Another tool that we need to have is called “deductions from own funds”. It would help to ensure that banks make adequate provision for risks – adequate from a prudential point of view.
The national accounting frameworks allow for some flexibility with regard to provisioning. And what a bank then chooses may not be sufficient from the supervisors’ viewpoint, taking into account the bank’s risk profile. That’s why supervisors should be able to impose prudential deductions from own funds. And third, there are some tools which are part of the European toolbox not once but twice.