ECB May Win Enhanced Bank Supervisory Powers in EU Negotiations

The European Central Bank may gain more power to give direct orders to banks as European Union lawmakers and governments thrash out a final deal on handing oversight powers to the central bank.

European Parliament lawmakers want the ECB to have the power to give instructions to any bank, including those directly regulated by national authorities, according to a document drawn up by Ireland, which holds the rotating presidency of the EU. The assembly is also pushing for clearer guarantees that it can investigate allegations of rule-breaking and misuse of funds at the ECB.

“Parliament wishes to provide the ECB with power to issue supervisory instructions directly to a credit institution,” according to the report, obtained by Bloomberg News. Lawmakers say this “intermediate power” should be available to the ECB before it has to resort to the “nuclear option” of taking on day-to-day supervision of a bank, according to the document.

EU finance ministers reached an accord last month to put the ECB in charge of supervising all euro-area lenders in a deal that paves the way for the currency bloc’s firewall fund to provide direct bailouts to banks.

Under the accord, the ECB could directly supervise any banks it chooses, while leaving day-to-day oversight of other lenders in the hands of national regulators. A final deal on the law must be negotiated by governments and the European Parliament.

Ireland will explore how far it can go in meeting the parliament’s call for more direct ECB power, the document says.

Lawmakers are also calling in the negotiations for the London-based European Banking Authority to be given enhanced powers, according to the document.

The assembly is seeking “a stronger role for EBA in relation to stress testing” of banks and “associated data gathering,” the note says.

Lawmakers also want the EBA to be tasked with drawing up a “single supervisory handbook” that regulators in the bloc would follow.

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