May 23, 2018 / 10:50 AM / 10 months ago

Common fiscal backstop, EU deposit scheme essential to cut bank, sovereign links

FILE PHOTO: Spain's Central Bank Governor Luis Maria Linde attends the 2016 Institute of International Finance (IIF) Spring Membership meeting in Madrid, Spain, May 25, 2016. REUTERS/Susana Vera

MADRID (Reuters) - A common fiscal backstop for the single resolution fund and a common European deposit scheme (EDIS), with eventual full risk mutualization, are essential to cut links between banks and sovereigns, the Bank of Spain head said.

“Both are essential elements to severe the links between banks and sovereigns and to bolster the ability of the area to deal with large macroeconomic shocks,” Bank of Spain Governor Luis Maria Linde said on Wednesday.

European leaders are to decide in June on the path to introduce a common deposit insurance scheme and provide a backstop for a euro zone bank resolution fund in case it were to run out of money during a major banking crisis.

Linde also noted that the development of the Capital Markets Union was another key project that deserved to be mentioned at the top of the political agenda.

Reporting by Jesús Aguado; Editing by Paul Day

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