09.07.12 The ECB will control the eurozone banking sector

According to the European Commission project the European Central Bank (the ECB) will have the authority for supervision of all banks in the eurozone from 1 January 2014. The ECB authority will be sufficient enough to review the banking licenses.

Online PR News – 25-September-2012 – Kiyv – The European Commission draft says that the ECB should start monitoring activities in the banking sector from 1 January 2013, gradually taking all relevant functions in 2014. It is believed in Brussels that the ECB should oversee all banks in the Eurozone with about six thousands of them. This is in line with the so-called bank union project, which is the first step on the way to a deeper fiscal and economic integration of the currency bloc, said Reuters.
Under the European Commission plan, the ECB must receive extensive powers: to determine capital requirements, initiate checks, conduct stress tests and even deprive institutions banking license. Further steps on establishing a European Banking Union will be the introduction of common deposit guarantee and a single regulation on closing of bankrupt banks.
The German Savings Banks Association opposes the initiative of the European Commission, suggesting that the ECB should restrict its powers with the regulation of large universal banks only. German Chancellor Angela Merkel supported them indirectly, having declared in the German parliament that "it's about the quality of the supervision, not just about the quantity” (The RBC daily). In addition, German Finance Minister Wolfgang Schaeuble supposed that the European Commission plan timeframe was "unrealistic". The European leaders will discuss the initiative for the first time only at the summit in December. It should be noted that the European Commission initiative on empowering the ECB supervisory powers are considered the first phase to establish a full-fledged European Banking Union. In the event of the supervision being transferred to the ECB, the national regulators will deal with routine tasks only (control the rate of inflation), as their "strategic objectives" will be withdrawn. The initiative of the ECB granting supervisory functions requires the approval of all of the currency bloc.
"“It's unclear whetherthe ECB are going to be able to successfully meet the new challenges, given the fact that they put it in the center of a complex dialogue between the countries - creditors and debtors" – says MujtabaRahman, an analyst at Eurasia Group in New York.
At the same time, only the ECB is able to adequately deal with the financial crisis, says Dmitry Chernavski, the financial advisor. Although in this case, expanding the ECB functions carries a risk of excessive load, stresses Dmitry Chernavski. "A more probable scenario is when the European Central Bank will supervise the activities of the largest European banks only " - suggests Dmitry Chernavski.
Roberto Henriquez, credit markets analyst at investment bank JP Morgan is less optimistic about the matter. He stated"Political barriers are not trivial ... We believe that the target the region has set itself —implementation to begin from January 2013 — is unrealistic."