13 October 2012

Bundesbank/Dombret: "Let's move forward decisively and with commitment"

Dombret agreed that progress needed to be made on the European supervisory and resolution mechanisms, but emphasised that a banking union should not be used to mutualise legacy risks that have built up under previous national supervision.

On the sidelines of the IMF autumn meeting in Tokyo, Andreas Dombret talked to Emerging Markets about the proposed European banking union.

What is your main concern about the banking union as it has been proposed?

I very much welcome the proposals of the European Commission on the creation of a single supervisory mechanism. This is an important step to strengthen European integration and has positive effects on the stability of the European banking sector. A harmonised European banking supervision also can support monetary policy. However, we still need clarity on some issues, and we need to discuss how to harmonise bank resolution. Thus, the proposals will take some time to be shaped and implemented properly. It is important not to create unrealistic expectations with a too ambitious time schedule. Quality should not be compromised to the detriment of speed.

What needs to happen for Germany to agree to move forward on the banking union?

While we need to make progress on the European supervisory and resolution mechanisms let me emphasise that a banking union should not be used to mutualise legacy risks that have built up under previous national supervision. This would represent a mutualisation of risks through the back door with major fiscal implications. Such a step cannot be undertaken without proper democratic legitimisation.

How long do you think it would realistically take for banking union to take effect?

Up to now, we only have received EU Commission proposals for a single supervisory mechanism. Such a mechanism is the pre-condition for all other steps towards a banking union and needs to be implemented first. Subsequently, we need to move forward efficiently and in a united fashion. Only once the single supervisory mechanism is properly implemented and fully operational, it is prudent to have a realistic time frame for the next steps in the banking union. As we all know the devil is in the detail and therefore quality is more important than speed. Let’s move forward decisively and with commitment.

Interview

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