I think you can all imagine how complicated it could be to achieve anything like “a clear line of command” when there is a multitude of countries – and perhaps several authorities in each of these countries – involved in the decision-making. Then there is no longer merely the financial supervisory authority, the finance ministry and the central bank in one country that have to be involved, but all of these authorities in several countries. If there are no prior agreements on the division of responsibilities between the national central banks and the other relevant crisis management authorities, and on how to coordinate decisions in the case of a crisis, there is great risk that any attempt to manage the crisis will fail miserably. Language differences and different legal structures can often reinforce the problems. On top of this, there is a clear cross-border mutual dependence, which means that no single country’s authorities are entirely sovereign in implementing a solution to the crisis without the risk of significant repercussions in other countries. Recently, there have been a number of initiatives, regionally as well as on a European level, to enhance coordination. For example, a number of memoranda of understanding (MoUs) have been worked out and agreed, either bilaterally or multilaterally, and more MoUs are underway. These MoUs detail a number of principles and practical issues regarding the cooperation, the exchange of information and assessments between authorities and certain issues concerning the delineation of responsibilities.
And because we share similar experiences – still fresh in our memories – of major banking crises in the Nordic countries, we have perhaps a head start when it comes to recognizing and trying to deal with these challenges on a Nordic level, even if much worksstill remains. Here, I might add that integration on a pan-Nordic level has also come a long way in the area of securities exchanges and clearing and settlement facilities. Of course, the integration of the financial infrastructure poses similar challenges for authorities to cross-border banking and some additional complications as well. However, today I will focus on the challenges posed by cross-border banks. And I must stress that these challenges are not merely a regional problem. Due to the dynamic changes in the banking landscape, they will indeed require solutions on a European level. My main message today is that increased coordination is imperative, and, in this, it is vitally important that future arrangements for supervision, crisis management and crisis resolution of cross-border banks must be dealt with jointly as a package, and not in isolation from each other. It is apparent that the solutions in any one of these areas will depend on the solutions in the other areas. In particular, it will be necessary to address the issue of burden-sharing arrangements for the eventuality that a border-crossing bank becomes insolvent. If we don’t, there is a great danger that crisis management fails and valuable time will be lost.