Rabobank Chief Says ECB to Rely on National Regulators for Years
Rabobank Groep Chairman Piet Moerland said the European Central Bank may keep relying on staff from national regulators for years after assuming full supervision of the region’s largest banks in March 2014.
“It’s an illusion to think you can have fully fledged supervision from Frankfurt from the start,” he said in an interview at Rabobank’s headquarters in the Dutch city of Utrecht on Dec. 19. “We, and all banks in the first group of about 150 banks, will probably be dealing with staff from local regulators for the time being.”
Moerland, 63, heads the second-largest Dutch bank with 771 billion euros ($1 trillion) in assets, more than the nation’s economy. Its size makes it automatically fall under the first group to be supervised by the Frankfurt-based ECB according to a deal reached by European Union finance ministers earlier this month, which set the target start date for March 2014.
European governments assigned the ECB the powers to supervise national banks as a first step toward a banking union that should help sever the link between government finances and lenders. The central bank will rely on national regulators to oversee most of the region’s 6,000 banks, while assuming direct supervision of banks with more than 30 billion euros in assets or with balance sheets representing at least 20 percent of a nation’s economic output.
In the Netherlands, ING Groep NV (INGA), ABN Amro Group NV and SNS Reaal NV (SR) fall under that scope along with Rabobank. The four banks account for about 90 percent of the Dutch banking industry’s assets, Finance Minister Jeroen Dijsselbloem said.
The ECB will probably start by setting up a framework for uniform supervision to be applied by national authorities, Moerland said. Operationally “they will have to rely heavily on national expertise throughout 2014 and possibly a couple of years afterward,” he said.
It may take until the end of the decade before further steps toward a banking union such as a European deposit- guarantee fund and a resolution mechanism to unwind failing banks will be completed, the chairman said.
The EU plans to start work on a joint resolution framework next year, while a deposit-guarantee scheme remains a longer- term idea that isn’t currently under way. In the meantime, it is working on legislation to create common standards for national rules.
“There can be no burden sharing before a level playing field is in place and all participating banks comply with stricter capital requirements under Basel III,” Moerland said.
More than half of the 27 nations that agreed on Basel III will miss a January deadline to start implementing the capital rules, the Basel Committee on Banking Supervision said Dec. 14.
Rabobank is one of two European commercial banks rated AA- with a stable outlook by Standard & Poor’s and was able to steer through the global financial crisis without state aid. The bank had a core Tier 1 capital ratio, a measure of financial strength, of 12.7 percent at the end of June. It seeks to bolster the ratio to 14 percent by the end of 2016.
The unlisted lender is the only Dutch bank probed in global investigations into alleged manipulation of Libor. UBS AG, Switzerland’s largest bank, said on Dec. 19 it must pay $1.5 billion to U.S., U.K. and Swiss regulators for trying to rig global rates, triple the penalties levied against Barclays Plc.
Moerland declined to comment on the investigation.
“I do sincerely hope this chapter can be closed next year,” he said.
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