BIS central bankers’ speeches  5  behind the creation of a single system with a single resolution authority and single resolution fund, in line with the proposal by the European Commission for a single resolution mechanism. The resolution fund is to be entirely financed ex ante by the financial industry itself so as to protect the European taxpayer. Still, until the fund is fully built up or for exceptional circumstances, it should be able to obtain external funds via a backstop. Here, the feasibility of a credit line from the European Stability Mechanism could be explored. Any such backstop should be temporary in nature and compensated by ex post levies on the banking sector ensuring that the fund is fiscally neutral over the medium term. A banking union with these elements in place has the potential to delink banks and sovereigns, not least by following an important principle: bail-in precedes bail-out. This will ensure that shareholders and unsecured creditors according to the hierarchy of their claims are the first to bear losses, not the taxpayers. Monetary policy Speaking in my capacity as a central banker, let me finally come to the role of monetary policy in the deleveraging process. To counter the risks from disorderly deleveraging, the swift cuts in ECB policy rates and our non-standard measures were key. Fixed-rate full allotment and longer-term refinancing operations stabilised financial markets early on and counteracted the risks from fire sales by providing liquidity where it was most needed.
As regards the sector’s capacity and the size of banks, staff and office numbers fell by around 12%, standing at similar figures to those as at end-2004, and the average size of banks in terms of their assets increased twofold. Yet this progress was not enough to restore investors’ confidence in the soundness of our banking system. Given the double-dip recession, the insufficient reduction in the budget deficit and the continuing effects of the sovereign debt crisis, doubts persisted about the quality of construction and real estate development-related assets. In an attempt to dispel this uncertainty, various measures were adopted in the first half of 2012. Furthering the principles that have governed the ongoing restructuring of the financial system, the measures addressed accelerating the clean-up of bank balance sheets, reinforcing their solvency, boosting integration processes and promoting transparency. RDL 2/2012, approved in February, stipulated an increase in provisioning for construction and real estate development-related assets, and the creation of a capital buffer to cover potential losses arising on problem loans associated with land and ongoing developments. More recently, in May 2012, the Government approved RDL 18/2012, on the clean-up and sale of financial-sector real estate assets. The aim was to dispel doubts over the quality of Spanish credit institutions’ non-doubtful real estate portfolio. To do this, provisions for construction and real estate development-related assets not classified as troubled have been raised substantially, bringing forward the impact of potential additional impairment to this portfolio.