Bundesbank board member Andreas Dombret said possible conflicts of interest mean the European Central Bank shouldn’t have the final say at a new supra-national banking supervisor.
“If the central bank has final responsibility, then its independence would necessarily be curtailed,” Dombret said in a speech in Frankfurt today, according to a text provided by the Bundesbank. “Monetary policy decisions can have an influence on banks’ robustness. That may well lead to conflicts of interest.”
Euro-area leaders decided in June to create a single bank supervisor and boost the ECB’s oversight role as a precondition to allowing the region’s bailout funds to recapitalize banks directly. The European Commission is due to present its proposals in September, laying the first building block of a so-called banking union aimed at limiting financial-market contagion.
Dombret said that the ECB should instead play “a comprehensive consultative role” in an independent body whose representatives would be in line with the size of the member countries’ banking sectors. The body should oversee all European banks, he added.
“Supervisory powers imply far-reaching rights of intervention, and that requires direct democratic legitimation,” Dombret said.
Under one option favored by the U.K. and European Union officials, the ECB should have a core set of central powers to oversee all banks in the 17-nation currency bloc while delegating some tasks to individual countries, documents obtained by Bloomberg News this month show. The ECB itself supports a “light touch” to regulation in which it would leave day-to-day supervision for most banks in the hands of national authorities, the documents show.
“Whatever solution is realized in the end, I’m convinced that monetary policy should be separated from supervision as far as possible,” Dombret said.