This building will inevitably become known as the “house of the euro”. It provides a sound foundation for the ECB to pursue its mandate of maintaining price stability for all euro area citizens. In that sense, the building is a symbol of the best of what Europe can achieve together. But it is also a symbol of why we can never again risk to split apart. We are standing here today in what used to be Frankfurt’s former wholesale fruit and vegetable market, a state-of-the-art functional building from the 1920s that has largely been preserved and incorporated into the new structure. Between 1941 and 1945, more than 10,000 Jewish people from Frankfurt and nearby were deported from here to the concentration camps. A memorial on the east-side of the building has been built to remind us, and those who come after us, of deeds that cannot and must never be forgotten. An integrated, democratic and peaceful Europe was one of the key lessons from this dark chapter in history. We have come a long way since then – but nothing we have achieved should be taken for granted. European unity is being strained. People are going through very difficult times. A recent Eurobarometer survey on how households in several countries are coping with the crisis showed that all respondents had been affected by a loss of income, and almost all said life was worse since the crisis hit.
For the surviving clearing members, they would suddenly find themselves having unmatched positions, with continuing obligations to clients but a non-performing CCP on the other side. Two strategies come to mind, which I am airing for debate. The first would be “recapitalising” the CCP so that it can carry on. The second would be to aim to bring off a more or less smooth unwinding of the CCP’s book of transactions. On the former route, in the banking sphere the basic strategy is to develop regimes for bondholders to share in the losses after the equity is wiped out; a distressed bank gets “recapitalised” in some way through a reconstruction of its liabilities. But CCPs do not issue debt, so there is not obviously an economic equivalent of recapitalisation by way of haircutting the debt claims of bondholders. Recapitalisation would seem to entail an injection of new outside capital. That should not come from the public sector. So the only options are the surviving clearing members themselves or a new “owner”. On the face of it, the clearing members would have to be involved, as surely the stricken CCP’s default fund would also need replenishing in order for it to continue. If the default fund were to be replenished by its surviving clearing members, that could in principle be sorted out at the time or it could be pre programmed. In practice, making it up at the time must be dangerous.