Weidmann Says ECB Should Supervise Banks Only Temporarily

Bundesbank President Jens Weidmann said that the European Central Bank should keep euro-area lenders under its surveillance only temporarily.

“In the long run, it would be desirable to break off supervision from the ECB and assign it to a separate independent European institution,” Weidmann, who is also a member of the ECB’s Governing Council, said in the text of a speech in Berlin today. The ECB faces “potential conflicts of interest between its oversight responsibility on the one hand and its monetary-policy mandate on the other hand,” he said.

The Frankfurt-based ECB is preparing to start a risk review of bank balance sheets by the beginning of 2014 before taking over the supervision of euro-area lenders later next year. European officials are still debating how best to handle failing banks and break financial links between sovereigns and lenders by centralizing oversight and crisis management.

“Bank insolvencies have to be possible without endangering the stability of the financial system,” Weidmann said. “Therefore, we need a banking union that comprises, next to common supervision, a clear resolution and restructuring mechanism for systemically important financial institutions.”

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