Broadly casting the ECB’s mandate to cover all banks will avoid any disruptive capital flows between institutions subject to the two different regimes, and will also acknowledge the fact that severe problems have arisen from clusters of banks that sit below any obvious systemic threshold, but which nevertheless have imperilled the finances of governments. Ireland and Spain are, of course, examples of this.
This approach was considered at the October EU summit. There is, however, a practical question regarding the speed with which the ECB can reasonably assume responsibility – and potential reputational risk – for such a large universe of credit institutions, even with a model involving significant delegation of tasks to national authorities. This points to the need to articulate some transitional arrangements.