Weak euro zone banks will be allowed to fail – supervisor

WEAK euro zone banks will be allowed to fail, Europe’s new single supervisory authority boss has warned.

Daniele Nouy is the chief of the Single Supervisory Mechanism which was established as part of a bid to stabilise the EU’s banking system following the financial crisis as well as move the financial cost of failed banks from taxpayers.

“We have to accept that some banks have no future,” she told the Financial Times in an interview. “We have to let some disappear in an orderly fashion, and not necessarily try to merge them with other institutions”.

She also said that lenders should be forced to hold collateral against their sovereign bonds in order to break the link between failing banks and governments.

The European Banking Authority is analysing the health of 124 EU banks across 22 countries – its results are expected to be released in October.