Lamberts said Parliament will hold talks with the ECB to determine the details of how “democratic control” will work. “There are still some precisions to be made as to what we can do if we want to fire the chair and the vice chair” of the ECB’s oversight board, “so there’s still some writing to be made on that.”
Under the plans, the ECB will directly oversee around 150 banks, according to the central bank’s own estimates.
The ECB will directly oversee at least the top three biggest banks of every participating nation unless “justified by particular circumstances.”
Establishing the single supervisor is a condition for allowing direct bank aid from the euro area’s firewall. Finance ministers have pledged to agree on guidelines for such aid by mid-year.
International Monetary Fund staff called last week for the euro area to press ahead with setting up the single supervisor, in a bid to break a vicious circle damaging confidence in Europe’s banks and public finances. The fund also warned that the new supervisor will need to be independent from the ECB’s monetary policy role to prevent conflicts of interest and keep financial supervision from taking a subservient role.
IMF Managing Director Christine Lagarde today endorsed rescue deal for Cyprus outlined by euro-area finance chiefs, to which the IMF may also contribute. She said Cyprus will need to shrink its banking sector as part of any rescue package.
“It is still very much a central piece of the agreement that was reached that the banks will have to be right-sized and restructured properly in order to make the whole business model sustainable going forward,” Lagarde said in Frankfurt.
EU governments have provided 1.7 trillion euros of aid for their banking systems in response to the financial crisis that erupted following the 2008 collapse of Lehman Brothers Holdings Inc. The amount is equivalent to more than 13 percent of the bloc’s economic output, according to European Commission data.
The legislation to hand the ECB bank oversight powers must be approved by national governments and voted on by the European Parliament before it can take effect. The ECB will take at least a year to set up shop once the regulations are in place.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.