Newspaper article International Herald Tribune

E.U. Pushes for Central Supervision of the 6,000 Banks in Euro Area

Newspaper article International Herald Tribune

E.U. Pushes for Central Supervision of the 6,000 Banks in Euro Area

Article excerpt

The European Commission insisted on Friday that the 6,000 banks in the euro zone should be supervised centrally as a bulwark against future financial crises.

The European Commission insisted on Friday that the 6,000 banks in the euro area be centrally supervised to prevent future financial crises, even though leading German politicians expressed skepticism about the breadth of the plan.

The proposal, which the commission said it would formally present on Sept. 12, is expected to hand the European Central Bank the right to withdraw banking licenses and the power to order other adjustments, representing a sharp turn away from national controls. The proposal stops short of allowing the E.C.B. to wind up problem banks, leaving that function to national regulators.

A main objective of the policy is to curb the ability of individual countries to prop up failing banks or conceal problems, ideally improving the stability of the broader euro zone.

The changes are an "opportunity for euro zone leaders to show the world that they are drawing lessons from the crisis and can streamline their supervisory structures," Karel Lannoo, chief executive of the Center for European Policy Studies, wrote in a commentary published by his organization on Friday.

But some Germans are highly sensitive about giving up authority over their large public banking system, which is partly controlled by states, districts and cities, and that has cast some doubts over the goal of turning the proposal into European law by the end of the year.

Klaus-Peter Flosbach, finance policy spokesman for the parliamentary group of the ruling party in Germany, the Christian Democrats, told the daily Suddeutsche Zeitung that it was "completely wrong" for the E.C.B. to regulate the Sparkassen, the hundreds of German savings banks. Germany's Landesbanken, the regional banks, were severely hit by the financial crisis in 2008 and 2009.

Writing in The Financial Times, the German finance minister, Wolfgang Schauble, said supervision should focus only on those banks that could pose a threat to the entire European financial system, while some key policy makers at Germany's central bank, the Bundesbank, have expressed wariness about expanding the European bank's powers. …

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