Draghi Says ECB Won’t Be Overburdened by Bank Supervision Role
European Central Bank President Mario Draghi said his institution has the competence to supervise the euro region’s banks and sought to lay to rest concerns that it may be overburdened by the task.
“Some observers have suggested that the presence in the same institution of monetary policy and supervisory decisions can lead to excessive burdens, a potential confusion of roles and/or distorted incentives,” Draghi said in a speech at a banking congress in Frankfurt today. While those concerns “must be taken seriously,” building a single supervisor around the ECB “is the only pragmatic” option “in the present circumstances,” he said.
A single supervisor for all 6,000 euro-area banks under the auspices of the ECB is a key plank in efforts to create a banking union and put the monetary union on a sounder footing.Germany’s Bundesbank has raised concerns about whether the ECB’s new role will compromise its ability to control inflation, and there have also been calls for the ECB to supervise only the biggest banks.
Draghi said “all banks established in participating member states would in principle fall within the remit of the single supervisor,” and he stressed the need for “rigorous separation of monetary and supervisory policies.”
“We are taking this issue very seriously and we have envisaged ways to address it,” he said. “The ECB has the advantage of having a very clear goal of price stability, expressed in a transparent and measurable way. This objective has never been compromised in the 14 years of the euro so far and it will not be compromised in the future.”
Working jointly with national supervisory authorities, “the ECB will have the legal authority and technical capability to carry out this complex task successfully,” Draghi said. A single supervisor is important to “ensure a level playing field” and will also “prevent fragmentation in the financial system, which is precisely what we are aiming to repair.”