FRANKFURT (Reuters) - The plan for closer EU financial integration is far from complete and governments need to deliver on their promises, said Daniele Nouy, head of the new banking watchdog that marks the first pillar of Europe’s banking union project.
Nouy was speaking on the eve of the Single Supervisory Mechanism (SSM) officially taking over as the euro zone’s banking watchdog, a year after lawmakers rubber stamped the project that is part of a bigger strategy to avert a repeat of the financial crisis through closer integration of the sector.
With her institution ready to go, Nouy urged governments to do their share to put the remaining pieces of the banking union into place - mainly a joint mechanism to tackle non-viable banks without burdening taxpayers.
“There is no room for complacency,” Nouy told the European parliament’s Committee on Economic and Monetary Affairs in a public hearing in Brussels on Monday.
“Member states need to deliver on the commitment to establish an appropriate borrowing capacity for the single resolution facility. The banking union will only be complete when we have a level playing field for all financial institutions within the European Union,” she said.
She also called for harmonized financial regulation to be implemented in a consistent fashion, something that would be helped by the single rulebook of the European Banking Authority.
The new watchdog that was set up under the auspices of the European Central Bank will start directly supervising the euro zone’s 120 largest lenders, including Germany’s Deutsche Bank (DBKGn.DE) and Spain’s Santander (SAN.MC) from Tuesday.
“I am indeed pleased to confirm to you today that we are ready to take on the responsibility for the single supervision of the euro area banks,” Nouy said.
To make sure it will not be made responsible for problems that occurred before its time, the ECB put the euro zone’s top banks through a rigorous balance sheet review, that saw 13 banks fail and in need of filling a 9.5-billion euro capital hole.
The banks in question have until Nov. 10 to present the ECB with a capital plan and they will then have six to nine months to raise the funds.
Nouy said she was confident that the capital holes could be filled without tapping public funds.
Italy’s Banca Monte dei Paschi di Siena (BMPS.MI) said on Sunday it was studying the possibility of plugging a 2.1 billion euro capital shortfall - the largest among the banks that failed - entirely through a rights issue.
The conclusion of the ECB’s bank health checks that occupied the sector for the past 12 months is seen as a key step to draw a line under the crisis.
Nouy said the newly gained “transparency is an important element in enhancing the confidence of investors in the European banking system”.
The ECB in particular hopes that banks will now be in a better position to lend to euro zone households and companies when the recovery takes off, which would also help its record low interest rates reach the real economy more easily.
Even if it might still take a while until companies are more willing to invest again, ECB Vice President Vitor Constancio said earlier “the economic recovery will not be hampered by credit supply restrictions”.
Editing by Crispian Balmer