Nowotny Says ECB Should Limit Oversight to Major Banks First

The European Central Bank should start with supervising only a small group of major lenders to make sure it doesn’t take on more than it can handle and widen the scope later, Governing Council member Ewald Nowotny said.

Taking on bank supervision in the countries sharing the euro currency and beyond is fraught with risks for the ECB’s reputation, Nowotny said at a conference in Vienna today. To limit the risks and to curb the size of a possible backstop to fund recapitalization measures, the ECB should probe fewer than the around 130 banks envisaged for an asset review scheduled for next year, he said.