- Lawmakers see `conflict of interest' in ECB's dual role
- Schaeuble says limited EU rule change may suffice for split
German Chancellor Angela Merkel’s coalition backed a resolution calling for a complete separation of the European Central Bank’s supervision of financial institutions from its monetary policy role.
The lower house of parliament on Thursday voted in favor of the motion, which also urges the government to ensure that small, lower-risk institutions such as cooperative and savings banks aren’t overburdened by regulatory requirements. The legally non-binding proposal is the outcome of a review of the establishment of European supervisory bodies for banks, insurers and securities trading made in response to the global financial crisis.
“The ECB’s dual competence for monetary policy and banking supervision is not acceptable in the long run,” Manfred Zoellmer -- a lawmaker from Merkel’s junior coalition partner, the Social Democrats -- said in a speech to parliament. “We don’t want to lose sight of this although we know of course that Europe is fighting very different problems in the present-day situation.”
The resolution, backed by the caucus leaders of all three governing parties, adds weight to calls from German government and Bundesbank officials to split the ECB’s Single Supervisory Mechanism arm from the rest of its operations because its interest rate and bond-buying decisions could be influenced by its insights into banks’ books. The measure also calls for a “clear division of tasks” between the ECB and Germany’s financial watchdog in the supervision of lesser institutions. An ECB spokesman declined to comment.
German Finance Minister Wolfgang Schaeuble said last month that the separation is “urgently necessary” and could be accomplished by means of limited European Union treaty changes under simplified legal procedures, rather than a complete overhaul of the rule book. Schaeuble led criticism of the ECB’s dual role as the guardian of monetary policy for the euro area and the region’s banking regulator in the journey toward banking union, conceived to put Europe’s financial sector on a safer and more stable footing in the wake of the financial and debt crises.
To avoid potential conflicts of interest, the ECB carries out the supervisory and monetary tasks independently. Staff members are housed in separate buildings and are bound by codes of conduct that forbid them from discussing their tasks. Nevertheless, the ECB’s Governing Council is legally the central bank’s highest decision-making body, meaning the work-streams converge there and all supervisory decisions have to be at least tacitly approved by it.