* ECB to become banking supervisor later this year
* Will get powers to approve bank licences, M&A
* Single Supervisory Mechanism for sector to start on Nov. 4
* To decide at least 2 months before which banks significant
By Eva Taylor
FRANKFURT, Feb 7 The European Central Bank
presented draft rules on Friday for how it will supervise
commercial banks in the 18-nation euro zone from November,
putting itself firmly in the driving seat.
The draft of the Single Supervisory Mechanism's rules give
the central bank wide-ranging powers, including the right to
approve mergers and acquisitions and to demand that lenders
increase their capital buffers.
From November, the ECB will supervise directly around 130 of
the bloc's top lenders as part the European banking union that
aims to create a more level playing to make banks more resilient
for future crisis.
The rest of the roughly 6,000 euro zone banks will remain
under the brief of national supervisors, though the ECB will
have powers to intervene if it deems necessary.
"The ECB will decide on the authorisation of mergers and
acquisitions or other operations," said Ignazio Angeloni, head
of the ECB's financial stability department.
The central bank will also have the last word on granting
and withdrawing bank licences and can ask for higher capital
buffers than applied by national supervisors to keep systemic
risks at bay.
"Here the powers of the ECB is the power to do more," said
Edouard Fernandez-Bollo, the supervisor of French banks and
insurers and the man in charge of drafting the framework
On Feb. 19, there will be a public hearing at the ECB, where
bank lobby groups and others can comment on the document. The
public consultation ends on March 7 and the final document will
be published on May 4.
Before the ECB assumes its new powers on Nov. 4, it wants to
make sure that the banks it will be responsible for have
sufficient capital to handle the risks on their books, putting
the euro zone's 128 largest banks through an in-depth review.
They may not all end up under its watch. The final list will
be drawn up by September. But industry heavyweights like
Deutsche Bank and Unicredit are set to be
From Nov. 4, so-called joint-supervisory teams consisting of
members from national supervisors and the ECB will monitor these
banks. For a bank like Deutsche, for example, the team could be
as large as 35 to 50 people.
Smaller banks will continue to be under the watch of their
national supervisors. But the ECB can step in to monitor them if
necessary, and national authorities will be obliged to inform
the ECB if one of their banks gets into trouble.
Five criteria define whether a bank is deemed worthy of
direct monitoring by the ECB:
* the total value of its assets
* its importance for the economy of the country in which it
is located or the EU as a whole
* the significance of its cross-border activities
* whether it has requested or received public financial
assistance from the European Financial Stability Facility or the
European Stability Mechanism
* whether it is one of the three most significant banks in
the respective country
The list will be reviewed annually and if a bank does not
meet any of the five criteria for three consecutive years, it
will go back to being supervised by national authorities.