Monday

23rd Jan 2017

Draghi seeks to allay German concerns on banking union

  • ECB chief Draghi wants a "serious" supervisor, that doesn't damage the central bank's reputation (Photo: European Parliament)

European Central Bank chief Mario Draghi on Thursday (6 December) sought to downplay a clash of views with the German government over the scope of a new banking supervisor by suggesting a bigger role for national supervisors when it comes to small regional banks.

Setting up the new supervisor for all 6,000 banks in the eurozone is "crucial" to boost market confidence at a time when eurozone recession is now projected to last well into 2013, Draghi said during a press conference following the monthly meeting of the ECB governing council.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Worsening prospects for the eurozone economy are "mainly related to uncertainties about the resolution of sovereign debt and governance issues in the euro area," he said.

With the ECB still acting as an intermediary between eurozone banks reluctant to lend to each other, Draghi insisted that "a single supervisory mechanism is one of the main building blocks" in re-integrating the banking system.

EU leaders in June had pledged to agree by the end of the year on the setting up of this supervisory body within the ECB. But Germany has since put the brakes on, with other countries in the more hawkish north - Finland and the Netherlands - also insisting that "quality must come before speed."

Earlier this week, talks between finance ministers broke down as Germany continued to oppose a scheme that would put all banks - large and small - under the ECB supervision.

According to German finance minister Wolfgang Schaeuble, the Frankfurt-based central bank could never be able to muster such a gigantic task.

His views overlap with those of German regional banks, some of which also experienced problems in the 2008 financial crisis.

"We want a supervisory body that is effective, quick and efficient. That can only happen if the supervisor is close to the banks and knows their business, Georg Fahrenschon, head of the German regional savings banks association, told this website.

"So for us it is logical that big banks are controlled at European level and for regional banks, that are close to people and the real economy, the responsibility lies with the national supervisor," he added.

Asked whether he does not see that other banks would take this as a precedent to elude eurozone supervision, Fahrenschon said the answer should not be a "mammoth" authority, but rather improving the performance of national authorities.

But Draghi suggested that while the ultimate responsibility would be held by the ECB, "in practice there will not be much difference" from what the Germans are asking for.

"The ECB supervisor won't be able to supervise 6,000 banks directly. As the size of a bank and its systemic significance decreases, so will decrease the supervision at central level and increase at national level."

He also downplayed the failure to reach a deal earlier this week.

"We have to look at these discussions in perspective: before the summer there was not even an idea about how this supervisor may look like. The discussion has really just started. I am confident we will reach an agreement, the benefits of having a single supervisory mechanism are not disputed."

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey