Plan unveiled for ECB to oversee banks
THE EUROPEAN Commission has unveiled extensive plans for the European Central Bank to supervise all euro zone banks, though Germany raised objections that the proposals risked overstretching the ECB.
European Commission president José Manuel Barroso set out the proposals in a speech to the European Parliament. He told its members that giving the ECB responsibility for monitoring banks would be the first step towards creating a banking union for Europe.
The reforms, which need to be approved by the EU’s 27 states, aim to break the link between struggling banks and indebted governments, an interdependence that has heightened the debt crisis over the past three years.
By empowering the ECB to police banks in the euro zone, the proposal is intended to break the cycle and lay the ground for deeper fiscal co-operation across the EU as the economic and monetary underpinnings of the union are strengthened.
“We need to move to common supervisory decisions, namely within the euro area,” said Mr Barroso. The ECB should take charge of all euro zone banks, he added – by most estimates about 6,000.
Germany, which is keen to retain primary oversight for its regional savings and co-operative banks, had already questioned whether the ECB should spread itself so thinly and repeated its reservations after the speech.
Chancellor Angela Merkel and finance minister Wolfgang Schäuble said the ECB would be more effective in its oversight if it had responsibility only for the largest, systemically important banks in the euro zone, which number about 25-30.
“The quality and efficiency of the new supervisor must be the focus. Purely on practical terms it seems impossible for the ECB to monitor 6,000 banks appropriately,” said Mr Schäuble.
For the plan to work, however, it will require states surrendering a degree of sovereignty over banking supervision. – (Reuters)