A publicity-shy French woman who shepherded her country’s lenders through the dark days of Europe’s debt crisis has become the chief supervisor of euro-area banks.
The European Parliament appointed Daniele Nouy to the helm of the European Central Bank’s oversight arm by a vote in Strasbourg, France, today of 555 in favor and 50 opposed with 52 abstentions. She’ll have one year to help to build the institution from the ground up and get it ready to assume its supervisory powers in full next November.
“France’s banking system has come through the crisis relatively well,” said Karel Lannoo, chief executive of the Centre for European Policy Studies in Brussels. “There are very few people whose reputation hasn’t been burnt by the crisis, very few. With Nouy, there’s not much you can say against her, and that’s very important.”
ECB oversight is the the first step in European Union leaders’ June 2012 pledge to break the cycle in which banks and nations compound each other’s financial strains. The bloc’s finance ministers are now wrangling over a European resolution mechanism to handle euro-area bank failures, something the Frankfurt-based central bank says is vital to contain future financial crises.
Nouy, 63, followed in her father’s footsteps when she joined the Bank of France in 1974. Over the following three decades she rose through the ranks of the central bank and after a five-year stint as secretary general of the Basel Committee on Banking Supervision, became France’s top bank regulator in 2003.
In that job, Nouy helped to guide lenders in Europe’s second-largest economy through Europe’s financial crisis. France had 2.2 billion euros ($3 billion) of liabilities outstanding at the end of 2012 from its efforts to support financial markets and institutions, according to Eurostat. That compares with 287 billion euros for Germany.
Nouy was appointed to her new job for a non-renewable five-year term. She’ll head a Supervisory Board that will bring together representatives of euro-area national regulators, four from the ECB and a vice-chair chosen from the central bank’s Executive Board.
She’ll directly oversee about 130 lenders from Deutsche Bank AG to Intesa Sanpaolo SpA, representing almost 85 percent of total euro-area banking assets, putting the ECB’s reputation as Europe’s most powerful crisis-fighting institution on the line. The ECB has begun a comprehensive assessment of these institutions and is expected to release results next autumn.
Nouy, who has never given a sit-down on-the-record interview to a major newspaper and who declined to be interviewed for this article, will also have to testify in the European Parliament.
“We have confidence in her ability,” Sharon Bowles, head of the European Parliment’s Economic and Monetary Affairs Committee, said last week. “She has the supervisor’s attitude, which is understanding that you’re accountable to parliament, perhaps rather than a central bank attitude, being a bit of a culture shock to have this element of transparency.”
Nouy achieved her success in a French regulatory environment shaped by the failure of French lender Credit Lyonnais in the early 1990s.
The Lyonnais debacle, which cost the French state at least 23 billion euros according to a 1997 European Commission estimate, made Nouy and her colleagues at the Banking Commission tighten controls and become wary of property bubbles in particular.
“The Banking Commission was very strict about controlling risks, especially in real-estate lending,” said Michel Pebereau, chairman of BNP Paribas SA until 2011.
Not that the French banking system escaped unscathed. At the end of 2012, the French state had taken on 50.6 billion euros of contingent liabilities to support specialized lenders such as Peugeot SA’s financial arm and Dexia SA, a bank Nouy oversaw together with the supervisors from Belgium and Luxembourg, which collapsed in 2011.
Dexia, once the world’s largest lender to local governments, has been dismantled after receiving two bailouts in less than five years. France and Belgium, which wrestled for more than a year over a second rescue, last December provided 5.5 billion euros to the bank through preferred shares.
Questioned about the episode by Bowles’s committee on Nov. 27, Nouy admitted to making mistakes.
“Like many other supervisors, holding sovereign debt and assets linked to loans to local authorities -- at the time the risk just wasn’t flagged and clear to us,” she said. “Supervision of a complex group through bilateral cooperation or trilateral cooperation was something at the time that was not up to scratch. We did make mistakes, no doubt about that.”
An outcry followed the appointment of Luxembourg’s Yves Mersch to the ECB’s all-male Executive Board earlier this year, increasing pressure on Europe’s leaders to find a female for the next big appointment at the central bank. The anomaly of a male-only European club became even more stark after Janet Yellen was named as the first female chairman of the U.S. Federal Reserve.
“This is a lady,” Roberta Angelilli, a vice president of the European Parliament, said before today’s vote. “We had a major battle to get one on to the board of the ECB.”