The establishment of temporary credit institutions or bridge banks is emerging as a key resolution tool, but the new resolution frameworks need to address a number of related technical issues, such as the question of who provides the necessary capital and liquidity to the bridge institution, how the bridge bank can use the infrastructure of the failed bank, and how and when it is ultimately dissolved, since bridge banks are temporary entities needing a good exit strategy. Finally, the design of bank levies, which could usefully be collected into resolution funds, is also a delicate area. Mechanisms are under examination both to recoup the losses of the crisis and to create provisions against future events. I believe that ex ante funding is a crucial element, since it may reduce moral hazard and improves the authorities’ ability to react to crises earlier, thus strengthening the credibility of such actions. Levies are valuable revenueraising mechanisms with which to finance crisis measures. Uncertainty remains as to how they would affect the particular problem of moral hazard in the financial sector, and both the rate and the base of levies need to be determined with care, especially if we want to include the aspect of systemic risk as well. However, maintaining a level playing field and coordination between Member States remains in my view paramount in order to avoid a distortion of fund contributions and resolution tools. Challenges ahead – more integration I am confident that the emerging EU regime will appropriately address all these challenges.
Vítor Constâncio: A European solution for crisis management and bank resolution Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at Sveriges Riksbank and ECB Conference on Bank Resolution, Stockholm, 14 November 2011. *  *  *  Introduction Ladies and gentlemen, It is an honour for me to speak at today’s conference, which has provided a stimulating debate on the challenging topic of bank recovery and resolution. The complexity of developing an effective framework for crisis management and resolution arises from the objective of achieving stability in increasingly integrated financial systems, where the authorities responsible for safeguarding their respective stability are still responsible towards their respective taxpayers. This element of complexity has been taken into account in a number of policy initiatives and suggestions worldwide. Especially in the EU context, I wish to acknowledge the pivotal role played by Lars Nyberg in this domain. His long-time devotion to the design and implementation of EU crisis management arrangements, coupled with his qualities as a central banker, have made Lars a key policy-maker for crisis management in the EU. I would also like to thank Lars for his long-standing and fruitful collaboration with the ECB in this field. Principally in the context of the work carried out by the Banking Supervision Committee, but also as Chairman of the EFC High-Level Working Group on Crisis Management, Lars has very often acted as a catalyst for coordination and cooperation among national authorities and EU institutions.