European Central Bank

Germany against rush on plans for single banking supervisor

PUBLISHED : Monday, 17 September, 2012, 12:00am
UPDATED : Monday, 17 September, 2012, 2:15am


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German Finance Minister Wolfgang Schaeuble led criticism of the euro area's rush towards common bank oversight as France, Spain, Italy and the European Commission pressed for speedy action.

European Union finance ministers were sharply divided over proposals to introduce a single supervisor in January within the 17-nation currency zone.

Schaeuble, backed by ministers from Sweden, the Netherlands and Poland, said the EU must be cautious before the European Central Bank took on its supervisory role, with the promise of direct bank bailouts from the euro's firewall fund.

Schaeuble said it would take time to build the "sizeable apparatus" required for the ECB to oversee more than 6,000 euro-area financial institutions.

"We plead very much that stress tests be conducted before systemically relevant banks get transferred from the national supervisor to the European," Schaeuble said after the meeting of ministers in Nicosia, Cyprus, on Saturday.

Schaeuble's comments raised the prospect of excluding troubled banks from the new supervisor's purview. Stress tests could be used to limit taxpayer exposure to losses.

The Brussels-based EC wants troubled banks that already receive government aid to be in the first group of lenders to come under ECB oversight.

Germany has broadly backed the banking union plans while emphasising the need for national regulators to monitor most of the euro area's banks.

EU leaders called for a single supervisor in June as a condition for allowing banks in the euro area direct access to the region's €500 billion (HK$5.09 trillion) permanent bailout fund, the European Stability Mechanism.

Spain, in the early stages of a €100 billion bank bailout, would benefit if the new system is in place fast enough to take over capital injections into the country's lenders.

French, Belgian and Italian finance ministers also pressed for rapid progress. "We can't waste time," French Finance Minister Pierre Moscovici said.

It is "obvious" that the new system would apply first to systemic and state-supported banks, Belgian Finance Minister Steven Vanackere said.