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Lautenschlaeger Says ECB May Spot Bank Difficulties More Quickly

European Central Bank Executive Board member Sabine Lautenschlaeger said central oversight of Europe’s banks should mean potential failures are spotted more quickly.

“One of the advantages of the Single Supervisory Mechanism is that it will draw on a broader and better basis of information on euro-area banks,” Lautenschlaeger said yesterday at a parliamentary hearing in Strasbourg on her appointment as Vice Chair of the ECB’s new Supervisory Board. “This implies that we will be able to uncover trends in individual business lines and risk management much sooner in the future. That will make it possible to reveal undesirable developments more quickly.”

The Frankfurt-based ECB is assuming bank oversight from November, as the first pillar of a financial union in the region designed to prevent or mitigate future crises. Lautenschlaeger, a supervisor with 20 years of experience probing German banks, must seek approval from European Union governments and lawmakers to be named as the second-in-command on the Supervisory Board.

The European Parliament’s economic and monetary affairs committee endorsed Lautenschlaeger’s appointment, setting the stage for a vote this week by a full session of the parliament.

Single Resolution

“I hope that European supervision, involving teams of supervisors from various nations, will provide a new paradigm that incorporates the best elements of each nation’s approach to supervision,” Lautenschlaeger said. “This new approach will leave no room for a ‘‘home-biased’’ supervisory regime.”

Lautenschlaeger, in a prepared text of her comments before the committee, argued that lawmakers and governments must make a speedy deal to establish a mechanism and fund to wind down failing banks, the counterpart to ECB oversight.

“In order to achieve a balance between liability and control, a cross-border supervisory structure needs to be complemented by a common regime for restructuring and resolution,” she said. “I hope that the legislative process will be completed in good time to allow the SRM to become operational by the end of this year.”

The vice-chair position on the Supervisory Board is designated to be filled by a member of the central bank’s Executive Board. Lautenschlaeger was appointed to that panel last month.

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