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Super Supervisor! ECB grabs the keys of 120 Eurozone Banks

A historic day! The European Central Bank is officially taking over the supervision of 120 biggest commercial banks within the eurozone area. As the Single Supervisory Mechanism, the ECB  will have the status of a new heavyweight among global regulators, that role carries with it the burden of restoring confidence in a battered banking system vulnerable to renewed economic shocks.

“They have an awful lot on their plate from day one,” said Guntram Wolff, Director of the Bruegel institute in Brussels. “There’s a very big pile of bad loans, profitability in this environment is going to be difficult, and the banking system itself probably needs to be restructured. The question is how the new supervisor can address that.” (read more in Bloomberg)

As the Super Supervisor, the ECB will monitor capital issuance by banks, and processthe results of a year-long asset review that revealed a stash of soured loans in the bloc now amounts to almost 900 billion euros ($1.1 trillion).

It was a decision taken by the EU to put the ECB in charge of overseeing the eurozone’s commercial banks. However this decision is causing a conflict of interests as this task is not enshrined in its statutes, notes German Deutsche Welle.

“ECB becomes Banca Schizophrenia,  causing a conflict of interests that is unlikely to make the industry more stable.

The EU’s decision to put the ECB in charge of overseeing the eurozone’s 120 commercial banks is a task not enshrined in its statutes – let alone one that the euro area central bank was designed to master technically. Ever since EU leaders moved to give the bank those additional powers two years ago, economists have warned of the potential conflicts of interest that this will logically entail. The mandate for banking supervision is in stark contrast to the bank’s primary task of maintaining price stability.” (read more in DW)

Anyway, this historic day where national banks come under central supervision will not be celebrated with fanfare and sober speeches full of optimism. The ECB has apparently decided to be proud of itself behind closed doors, raising a glass of champagne, and whispering a modest toast.

PS I suppose, it is now very official that the markets  rule and the new eurozone leader is called European Central Bank.


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