The European Commission is confident it can secure German backing for plans to hand the European Central Bank oversight powers over all banks in the euro area, the bloc’s financial services chief said.
“There’s no German resistance,” Michel Barnier said in an interview following meetings in Berlin yesterday, adding that there is an urgent need for the euro area to put the new system in place. “It’s a realistic proposal. We think a decision can be taken, should be taken, before the end of the year.”
German Finance Minister Wolfgang Schaeuble led criticism of the euro region’s rush toward common bank oversight at a meeting of European Union finance ministers in Cyprus last week. EU leaders called for the single supervisor in June as a condition for allowing euro-area banks direct access to the 500 billion-euro ($650 billion) permanent bailout fund, the European Stability Mechanism.
“From the first day, the European Central Bank as a supervisor should have the right to look closely into the activities of any bank and see where there may be problems,” Barnier said through a translator. It should have “the right to step in, to call up to Frankfurt a bank that might be causing difficulties.”
Spain, in the early stages of a bank bailout of as much as 100 billion euros, would benefit if the new system is in place fast enough to take over capital injections into Spanish lenders.
Euro leaders in June “underlined urgency, and they’re right,” Barnier said.
Schaeuble has cautioned against acting hastily to set up the supervisor, saying it will take time to build the “sizeable apparatus” required for the ECB to oversee more than 6,000 euro-area financial institutions. He has also said that banks posing broad risks should move to the new system first.
Barnier said he wouldn’t seek to challenge the “diversity” of the European banking system.
“We are very fortunate,” he said. “We have very big banks, universal banks, which have international dimensions: Deutsche Bank, BNP, Barclays,” he said. “We have national banks, regional banks, savings banks, mutual banks. This diversity is a chance for us, it’s a richness. There’s nothing in our text that will put that into question.”
‘Normal and Legitimate’
France, Spain, Italy and the commission are pressing for speedy action to put the new system in place.
It’s “normal and legitimate” that Germany should have questions and doubts about aspects of the proposals, Barnier said. “That’s why in the discussion of the proposed legislation process there will be compromises,” he said.
“The German banks don’t have anything to be afraid of,” Barnier said. “I know it’s not a small savings bank or mutual bank that caused the crisis.”
Barnier said it’s clear that some non-euro countries “want to be part” of the new supervisory system to boost the stability of their banks.
“What they’re asking is how they can be integrated, will they be allowed to sit at the table, will they have the right to vote and so on -- legitimate questions,” he said. “We have to find the right legal mechanisms to do that and we’re working on it with the ECB.”