THE International Monetary Fund has called for a European “fire brigade” funded by the finance industry to deal with the collapse of banks that operate in several countries.

Managing director Dominique Strauss-Kahn urged the European Union to create a European resolution authority to deal with insolvent banks that would force shareholders and uninsured creditors — rather than taxpayers — to bear the costs of failure. The authority would be funded by the financial industry from deposit insurance fees and levies on institutions, he said.

“What I think is needed is a European resolution authority, armed with the mandate and the tools to deal cost-effectively with failing cross-border banks — an ante-solution to the problems that currently hamper cooperation in crisis situations, rather than an ex-post one,” Strauss-Kahn told a conference in Brussels on Friday.

“It should cover at least the major cross-border banking groups, as well as all banks running large-scale cross-border operations under the single passport.”

Such a body could prevent a repeat of the debacle seen after Fortis collapsed in 2008. The Benelux lender had to be bailed out by the governments of Holland, Belgium and Luxembourg, at a total cost of euros 11.2bn. The fiasco toppled the Belgian government. “The difficulty of finding agreement across borders led to a likely costly break-up of Fortis along national lines,” Strauss-Kahn said. “And taxpayers in many countries are paying the price for crisis management and resolution frameworks that insufficiently protected their interests.”

— The Guardian, London