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You took part in the Troika negotiations and saw at first hand the crippling effects of the great financial crisis. From a supervisor’s perspective, what is the key to preventing another large-scale crisis?
The great financial crisis, the euro area sovereign debt crisis and the deep economic recession that ensued in Greece resulted in major challenges for the Greek banking sector. These included a sharp increase in non-performing loans, a bank run and loss of market access, and the eventual imposition of a bank holiday and temporary capital controls. Many lessons have been learned on how to prevent another crisis on this scale in the future. Those that stand out from a supervisor’s perspective are (i) the need to have an effective crisis management framework in place; (ii) the importance of completing the banking union by establishing its third pillar, the European deposit insurance scheme; and (iii) the significance of proactive and effective microprudential and macroprudential supervision. The common denominator is that we need more Europe. This means pushing forward with the necessary reforms during good times so as to take a proactive approach in the pursuit of our common goals. The Single Supervisory Mechanism (SSM) is an outstanding example of what we can achieve when we take bold steps in this direction....
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