Brussels, 04/11/2014 (Agence Europe) - On Tuesday 4 November, the ECB officially took up the responsibility for the direct control of 119 systemic banks, representing 82% of total banking assets, in the framework of the single supervisory mechanism, the first plank of banking union in the eurozone.
The 3,500 other banks of the eurozone will remain under the control of the national supervisors, in accordance with the express request of Germany. Nonetheless, the European institution will supervise the application of the banking prudential standards and will work closely with the national authorities. It may even decide to supervise certain small and medium-sized banks, if it feels that this is necessary for financial stability at eurozone level.
“We are ready!”, said Danièle Nouy, the chair of the prudential supervisory board, a body created within the ECB to separate banking supervision from monetary policy, appearing before the economic and monetary affairs committee of the European Parliament on Monday 3 November. “We now have a unique opportunity to develop a culture of supervision that is truly European”, she said in a press release issued on Tuesday 4 November.
Supervision teams made up of national and European supervisors have been set up within the ECB, in order to control the day-to-day activities of a systemic bank.
Welcoming the materialisation of the first plank of banking union, Commissioner for Financial Stability, Financial Services and Capital Markets Union Jonathan Hill said that the single supervisor would help to keep the sector “safe” and “alert to new risks emerging”. Banking union will be completed when the single resolution mechanism is set in place in 2016, particularly by adopting the Commission's proposals on the banks' contributions to the single and national resolution funds, an item on the agenda of the Ecofin Council of Friday 7 November (see EUROPE 11181).
The same satisfaction was expressed by the European Parliament. “As financial markets are cross-border, it is fundamental to unify the supervision of European banks. I welcome this major development which the European Parliament has been advocating for years”, said President of the European Parliament Martin Schulz. He went on to state that the emergence of a “European” culture of banking supervision, separated from the countries where the largest banking groups are headquartered, will favour the common good. He argued in favour of a single deposit guarantee regime to avoid an asymmetric banking union.
4 November coincides with the first anniversary of the entry into force of Regulation 1024/2013 inaugurating the single banking supervisory mechanism.
Over the last year, the spotlight has mainly been on the banking sector health check carried out by the ECB and the European Banking Authority (EBA), the results of which were published in late October (see EUROPE 11185). In these, 13 banks were flagged up with a capital deficit that must be plugged within six to nine months.
Addressing the European Parliament, Nouy said that the top priority for the single supervisor was to accompany the recapitalisation of these banks. She went on to acknowledge the fact that certain risks, such as the risk of “deflation”, had not been taken into account.
For more information: http://www.bankingsupervision.europa.eu (MB)