Question: Mr Draghi, you said in your opening statement that bank resilience needs to be strengthened – basically by recapitalising the banks that need it – and you have just touched on it again with the European Commission proposals, but that is all still some way off. Given that there seems to be a bit of a sense in some policy circles at the moment that, as you say, a bail-in is not such a bad thing, should people who deposit in banks over the insured level expect, more and more, to see those deposits become part of a bail-in, and is that the only way that you can tackle the lack of capital in the banks?
Secondly, since we talked about it last month, I just wanted to go back to OMTs and the legal documentation. How close are we to having that ready?
And, thirdly, related to that, if a country did suddenly apply for OMTs, would you be able to get the legal basis ready in time?
Draghi: The answer to the third question is yes, absolutely.
On the second question, it is being worked on and will come out when it is time, so there is no news on that front.
On the first question, there is a pecking order: ideally, uninsured depositors should be the very last category to be touched. The European Commission draft directive foresees exactly this. There is not, at present, a specific distinction between categories of bond holders and uninsured deposits in the draft directive but the point is that, if it can be avoided, uninsured depositors should not be touched. Banks should not only be properly supervised – with a view to them not outsizing the economy in which they reside – there should also be enough buffers, be they of capital, be they of other “bail-inable” bonds or of other sorts of “bail-inable” liabilities. I would say that, to a great extent, if you were to look at the other jurisdictions’ resolution mechanisms, you would not see much of a difference.
Question: If you go back to a case like Northern Rock, where their problem was that they were reliant on wholesale funding, and then you look at Cyprus where they are apparently almost exclusively reliant on retail funding, should regulators be looking at balancing the two and say that banks should not be too reliant on one particular kind of funding?
Draghi: Certainly. It is also another detail that I think should be looked at. The Federal Deposit Insurance Corporation makes an explicit distinction between uninsured depositors which, in general, are not touched, and bond holders. I think that the same distinction should be present in the European Commission’s draft directive. I think this is another lesson we can draw from Cyprus.