Future ECB Chief Confirms: Banks Definitely Have Funding Problems

Mario Draghi

Photo: Bank Of Italy

The Chairman of the Financial Stability Board and soon-to-be head of the European Central Bank, Italian Mario Draghi, told reporters this morning that banks are clearly having funding problems.This may have sent the euro into a tailspin.

It is unclear whether Draghi’s admission of bank fragility will affect his decisions as ECB president when he assumes the role next month. However, his advocacy for taking stronger measures to close up failing banks and recapitalize fragile ones could play a role in ECB policy in coming months.

Draghi said that the board is advocating plans for the world’s largest banks to set aside more capital, referring to the Basel Committee proposal finalised last week.

This news follows finalization of plans by the Basel Committee that would force 28 major banks to increase core common equity by up to 2.5%.

Jamie Dimon very publicly disputed that proposal last month, arguing that the proposals were “anti-American.”

Draghi said the board will submit crisis resolution plans to the G20, which will meet next in early November.

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