By Android Technico -
Jun 30, 2012 6:01 AM GMT+0700
The European Union’s push to unify
bank oversight moved to the euro area after two days of talks in
Brussels, putting the
European Central Bank at the center of
Spain’s efforts to extract its government from its banking-
industry rescue.
ECB President Mario Draghi
welcomed the summit’s overall conclusions and acknowledged the
Brussels-based commission’s mandate to assess the ECB’s role as allowed
in the treaty. Photographer: Hannelore Foerster/Bloomberg
June 29 (Bloomberg) -- Chad
Deakins, an international-equity fund manager for RidgeWorth Capital
Management Inc., and John Lekas, chief executive officer of Leader
Capital Corp., talk about investment strategy for Europe.
They speak with Trish Regan and Adam Johnson on Bloomberg
Television's "Street Smart." Michael Crofton, president and CEO of
Philadelphia Trust Co., also speaks. (Source: Bloomberg)
June 29 (Bloomberg) --
Michael Crofton, president and chief executive officer of Philadelphia
Trust Co., talks about the European sovereign-debt crisis and the stock
and commodity markets.
He speaks with Trish Regan and Adam Johnson on Bloomberg
Television's "Street Smart." (Source: Bloomberg)
Euro-area leaders asked for proposals this year to unify
banking supervision and soup up the ECB’s powers. They referred
to a clause in the EU treaty that allows them to give the ECB
prudential oversight of banks and other non-insurance financial
companies.
The move paves the way for the European Commission, the
EU’s regulatory arm, to augment its proposals on
deposit
insurance, capital requirements and how to handle failing banks.
It also acknowledges concerns from the U.K. and Sweden that
countries outside the currency area be free from mandates to
join the ECB umbrella.
Once
Europe establishes a single banking supervisor,
leaders said they may allow cash-strapped lenders to be
recapitalized directly instead of through their home
governments. This could break the link between banks and
sovereigns that has plagued the euro area throughout the crisis
and become a particular flash point for
Spain’s bank rescue.
‘Held Hostage’
“The Spanish sovereign is effectively being held hostage
to what is likely to be a tortuous political process in putting
the ECB in charge of euro-zone banks,” said Nicholas Spiro,
managing director of Spiro Sovereign Strategy in
London. He said
direct recapitalization of Spanish banks is the summit’s most
important achievement and hinges on creation of an independent
supervisory authority.
French President
Francois Hollande predicted that ECB
supervision over euro-area banks wouldn’t be in place before
year end. British Prime Minister
David Cameron said “the euro-
zone countries are well on the way to making the euro-zone bank,
the ECB, the regulators of their banks. That will be a good
outcome.”
ECB President
Mario Draghi welcomed the summit’s overall
conclusions and acknowledged the Brussels-based commission’s
mandate to assess the ECB’s role as allowed in the treaty.
Speaking to reporters today, he did not elaborate on how the
commission’s proposals should take shape other than to say “all
these things should be, to be credible, accompanied by strict
conditionality.”
National Supervisors
The Frankfurt-based ECB might end up serving as an umbrella
over national supervisors, rather than building a separate
organization, EU officials said in the run-up to this week’s
summit. EU members would need to decide how many banks to
include and how the ECB would work with the European Banking
Authority, which was created to help supervisors coordinate
across the 27-nation bloc.
EU Financial Services Commissioner
Michel Barnier called on
all the bloc’s nations to broker deals on draft financial
regulations in the coming weeks as a “cornerstone” of the
banking union that EU leaders seek to secure the long-term
future of the euro, in an interview in Brussels yesterday. He
said decisions on whether the ECB or the London-based EBA gain
enhanced powers depends on how all 27 nations agree to further
pool their bank-oversight powers.
The EBA, which began work last year, was set up as part of
the EU’s response to the crisis that followed the 2008 collapse
of Lehman Brothers Holdings Inc. It coordinates the work of
national regulators and has some power to resolve disputes
between them.
Banking Union
Where to place enhanced supervisory power becomes a
trickier decision if individual countries opt out of a banking
union, Barnier said, in part because the ECB decides monetary
policy for the 17 countries of the euro area, and in part
because of other aspects of the EBA’s mandate. Should all 27 EU
countries sign up for the banking union plans, then the enhanced
power for the EU to supervise lenders should “probably” be
handed to the EBA, Barnier said.
“If you are fewer than 27 then there is an issue to
resolve with the EBA, if you are more than 17 then there is an
issue to resolve with the ECB,” he said. “This is why there
are a range of possible models, and why we need some weeks or
months to work on this.”
The adoption of proposals that the commissioner has made on
bank
capital requirements, coordination of deposit guarantee
programs and the winding-down of failing banks is a
“precondition” for the creation of a banking union, Barnier
said yesterday in an interview with Bloomberg News in Brussels.
The draft laws should be settled “in the weeks to come, or in
the case of crisis resolution before the end of the year.”
Depending on the outcome of the summit, the commission will
present plans for extra EU supervision of banks, as well as for
“the mutualization of deposit guarantee funds and resolution
funds” by year end, Barnier said.
