The creation of a European banking supervisor will be a long, slow process, but the eurozone does not have the luxury of time, observes Fleming in his European Voice column.
There has been an earnest academic debate for decades about whether or not central banks should be given the job of supervising the banking sector. The arguments on both sides become even more complex when the central bank concerned is a multi-national institution like the ECB, rather than the central bank of a unitary nation state with tax-raising powers and implicit political legitimacy.
Moreover, on a practical level, the ECB simply does not have either the institutional history or the in-house expertise to do the job effectively from day one. It would take many years to develop it. The fact that many members of the European System of Central Banks, including Spain's central bank, are already banking supervisors could help. But to draw attention to Spain is to remind ourselves that no part of this embryonic supervisory network has distinguished itself in the past few years.
It will be several months at least, some say the middle of 2013 at best, before the summit's initiatives on banking supervision can be put in place in EU law. The communiqué calls for an interim report on how to proceed with issues related to economic and monetary union by October and a final report by the end of the year.
Do Europe's leaders, given their experiences of the past five years and the recent deterioration in the European and global economic outlook, really think they have so much time to play with? ECB President Mario Draghi suggested last week that it was better “to do things well” rather than fast. He said that he could envisage a reversible, interim, bank rescue recapitalisation while the details of a new European bank supervision regime are finalised. Monday's Eurogroup decision to release a first tranche of €30 billion of indirect bank aid to Spain fits this formula. By implication, Draghi is suggesting that the existing rescue framework and the ECB will, as they have done so far, be able to sustain the single currency while the political processes inch ahead.
Full article (EV subscription required)
© European Voice
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article