Make ECB Europe’s bank watchdog, says Brussels

“The European Central Bank would be given sweeping authority over all 6,000 eurozone banks under a plan being drawn up by the European Commission, putting Brussels on a collision course with Germany and the ECB itself,” revealed The Financial Times. Under the plan, to be formally announced in September, existing national supervisors would be stripped of almost all authority to shut down or restructure their countries’ failing banks. The newspaper added –

A new single banking supervisor would be the most significant change in eurozone financial governance since the single currency’s creation, giving the EU the kind of federal authority it has thus far lacked to decisively tackle the two-year-old crisis.

In an editorial on the deal,the business daily added –

If indecision or disagreement is going to derail the euro, it will not be over bond purchases but over banking union... A banking union that would not allow eurozone control of an Anglo-Irish Bank or a Bankia is hardly worth the effort. Perhaps Berlin will come round to this view – but probably only if the ECB does so first.

German Finance Minister Wolfgang Schäuble, writing inThe Financial Times, argued for limiting the ECB’s authority to just the largest banks, adding: “self-regulation and light-touch supervision just do not work in the financial sector”. He continued –

It is crucial that the new system be truly effective, not just a façade. We must eschew yesterday’s light-touch approach for good and endow this supervisor with real and clearly defined responsibilities, coercive powers and adequate resources.

In an interviewwithLes Echos, Michel Barnier, the European Commissioner for the Internal Market, said he wanted "continue this work and the push towards a more integrated system." Or in other words, to a banking union –

This requires the establishment of a European deposit guarantee fund and a fund to resolve banking crises. On these points, two texts are on the table and I hope that they are voted on fairly quickly.