European Central Bank Executive Board member Joerg Asmussen said he doubts the central bank will be ready to assume its role as a single banking supervisor by January as many of the proposals are still “half-baked.”
While all the European agencies involved are working hard to show that the region can learn from the crisis and act swiftly, “it’s just as important to ensure the new supervisory structure is built on firm and sound foundations,” Asmussen said in a speech in Vienna.
Rushing into the new role “risks harming the reputation of the ECB” if nothing has changed substantially yet, Asmussen said. “Therefore it’s doubtful that we’ll meet the target date of January 1, 2013.”
The European Union last month unveiled proposals for euro-area bank oversight that require unprecedented cooperation between the ECB and national regulators. The Frankfurt-based ECB should expand its role as financial-system guardian by becoming the top-level supervisor for all 6,000 lenders in the 17-nation currency bloc.
“I want to make something clear to all those who are angling for a possible direct bank recapitalization via the European Stability Mechanism and are prepared to go with a half-baked solution for the banking supervision: not with us. We won’t sacrifice the ECB’s reputation for this,” Asmussen said.
EU leaders called for a single supervisor in June as a condition of bailout assistance directly to euro-area banks. Such a mechanism would be designed to decouple government funding to prop up failing lenders, breaking the link between sovereign and banking debt that has been blamed for compounding the crisis.