The ECB must thus exercise its powers based on the national transpositions; and these vary from country to country. This creates uncertainty and inconsistency. What we thus need is a harmonised legal basis from which we can apply early intervention measures. Now, let’s go one step further. Imagine our bank gets into more serious trouble. In this scenario, there is one tool that helps to create a bit of breathing space for the bank and the authorities to sort things out – a moratorium. A moratorium allows the authorities to suspend all the activities of a bank for a short period of time. In a sense, it freezes time. A moratorium helps to manage a crisis in an orderly manner. It gives the bank and its shareholders time to find a solution. This is particularly useful during a sudden liquidity crisis. However, there is a practical problem. Moratoriums are not part of the European toolbox. In some countries they do exist; in others, they don’t. And in any case, they are not harmonised. We need harmonised, short-term moratoriums in all euro area countries. If, for instance, a cross-border bank gets into trouble, the supervisor in that bank’s home country can impose a moratorium. But what if the bank has a subsidiary in a country where only a court could impose a moratorium? What if the bank has a subsidiary in a country where a moratorium cannot be imposed at all? This is a serious stumbling block for crisis management at European level.
On the basis of that guidance, we scrutinise the banks’ strategies and provide feedback. So we are keeping a close eye on how banks are addressing the problem. And today, we have published an addendum to our guidance. This addendum will help to ensure that NPLs remain a problem of the past once they have been dealt with. To that end, it lays out how we expect banks to provision for new NPLs. More specifically, it refers to exposures that are newly classified as non-performing as of 1 April 2018. The addendum is not a binding document, but it specifies our expectations and will thus serve as a starting point for our dialogue with each bank. Conclusion Ladies and gentlemen, Rest assured that I have not exhausted the topic of my speech. But I may well have exhausted you. So I will conclude quickly and painlessly. First, banks are important for the economy, particularly here in Europe. That said, it might be good to add a bit more capital market to the mix; but that is a topic for another day. Second, banks must be able to fail. If they are not, the economy will suffer in the long run. But if banks fail, they must do so in an orderly manner. If not, financial stability will suffer in the short run. The new European resolution framework helps to make orderly failure possible. Third, failure is the least desirable outcome, of course. We need banks which are profitable and resilient in the first place.