Brussels, 17/12/2012 (Agence Europe) - Rapid implementation of the bank supervision mechanism (BSM) is important, but it is more important to do it well, said Mario Draghi, the president of the European Central Bank (ECB), on Monday 17 December in a hearing at the European Parliament's Economic and Monetary Affairs Committee.
Draghi welcomed the unanimous agreement last week on BSM, saying that once the regulation comes into force, the ECB would have a year to get it up and running - in other words by March 2014, assuming the three-ways talks that begin on Tuesday are successful. He said, however, in response to concerns expressed by Marianne Thyssen (EPP, Belgium, who is the Parliament rapporteur on BSM) that these were unknown waters so it is best to keep some time up our sleeves to use in the event of necessity. Thyssen wondered about a clause to allow the ECB to delay BSM if it feels it will not be ready on time. Draghi said that the ECB would get to work rapidly in order to be ready on 1 March 2014, as planned, adding that bank supervision needed to be properly hived off from monetary policy, but better supervision would facilitate monetary policy. He said that 14 of the 17 central banks in the eurozone already exercised supervisory powers. Draghi added that the ECB had healthy fundamentals and the green light from European Commission lawyers demonstrated that the bank had a solid legal basis for its new powers.
BSM, along with the ability for the European Stability Mechanism (ESM) to directly bail out banks, will break the vicious circle of bank problems leading to sovereign debt problems. BSM is only the first stage in banking union, which will include a common savings guarantee system and a common bank bailout system. The latter should be a key priority next year, said Draghi. It will have an impact on the real economy because, he said, it will help get the inter-bank loans system revving again and will facilitate cross-border lending. Moreover, it should boost confidence in the eurozone, which would in time make risk pooling possible. The ECB will have direct control over 130 to 150 banks, said Draghi, with the remainder of banks being covered by national supervisory bodies, although the ECB will remain the “centre of gravity.” The ECB will have the right to investigate any bank. National supervisory bodies will have a full role to play because they will work on the Supervisory Committee with four representatives of the ECB, so “we will all work together” explained Draghi. (EL/transl.fl)