ECB nagged by questions over bank supervisor role

Fri Nov 23, 2012 9:31am EST

Related Topics

* ECB's Draghi says principles of regulation clear

* Commerzbank CEO says role needs further clarification

* German regulator says ECB may be able to veto bank mergers (Recasts lead, adds quotes)

FRANKFURT, Nov 23 (Reuters) - Regulators and lenders called for more clarity over the European Central Bank's role as regional banking supervisor as moves to shape its responsibilities gather momentum.

European Central Bank (ECB) President Mario Draghi told a banking conference on Friday the creation of a single supervisor was essential to creating a fiscal union and breaking the negative relationship between government indebtedness and wobbly banks that has been dragging down the European economy.

"The single supervisory mechanism should also strengthen the European market," Draghi said, adding that all EU member states, even those outside the euro zone should be able to participate.

The ECB was already clear on many of the principles of the single supervisor but politicians must set out its legal basis as soon as possible, ideally on Jan. 1, 2013, so preparations can begin, Draghi said.

But the chief executive of Germany's second-biggest lender, Commerzbank, said Europe's leaders had yet to make clear whether the unified supervisor would focus on stabilising markets or on providing back-door financial transfers to weak euro zone states.

"Do we want European supervision to be an institution that truly stabilises our financial system or more as a vehicle for re-allocation and transfer?" Blessing told an audience of bankers and regulators at the conference in Frankfurt.

"Funds should be provided to banks only if the ESM/European supervision has the ability to clamp down and receive ownership of failed banks," he said, referring to the European Stability Mechanism, the EU's rescue fund.

Other financial players also pointed to areas where the single supervisor's role needed to be clarified.

Elke Koenig, president of German financial watchdog BaFin, said lawmakers and regulators might give the ECB powers to veto bank mergers.

"This is one of the details which is under discussion, whether this should be one of the tasks of a new European bank regulator," Koenig said on the margins of the conference.

While European banks are readying themselves for a single supervisor, they are also mastering a raft of changes to risk management and bank capital rules known as Basel III and due to start taking effect on Jan. 1.

European banks and regulators have expressed concern that the United States may not implement Basel III on time, creating a distortion in competition between the two regions.

Bundesbank Vice President Sabine Lautenschlaeger said on the margins of the conference she still expected the United States to put the new rules into effect on time but warned of consequences if it did not.

"I they don't join in, we will have to examine what we do with the U.S. institutions in the euro zone," Lautenschlaeger told reporters, adding this could lead to stricter supervision of U.S. banks in Europe.

BaFin's Koenig played down the prospect of such action, saying the body best tasked with enforcing Basel III rules globally is the Financial Stability Board.

"It is up to the FSB to present the case to the G20 if this needs to be discussed. It is up to them to exert pressure."

U.S. banking regulators said earlier this month they did not expect the Basel III rules, designed to make the global banking system more resilient in the aftermath of the financial crisis, to take effect on schedule. (Reporting by Jonathan Gould and Edward Taylor; Editing by Mark Potter)

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