ECB may not supervise all banks: Merkel ally

Sat Sep 22, 2012 7:16am EDT
 
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By Andreas Rinke

BERLIN (Reuters) - A senior conservative ally of German Chancellor Angela Merkel has suggested the European Central Bank may not get new powers to supervise all of the euro zone's banks and said the existing European Banking Authority could be enhanced instead.

The European Commission has proposed making the ECB the main supervisor for euro zone banks to prevent problems at lenders struggling with bad debts from sucking weak euro zone countries deeper into the debt crisis as they borrow to finance bailouts.

Michael Grosse-Broemer, chief whip of Merkel's conservatives, told Reuters it was unclear whether the ECB would take over the role of overseeing the euro zone's banks and said it had not yet been decided which institution would become the bank supervisor.

"I would not exclude the possibility that the existing European Banking Authority (EBA) will be enhanced and reorganized," he added.

Grosse-Broemer said this would save having to reform the ECB, where responsibilities for monetary stability and banking supervision are otherwise strictly separated.

But the EBA would need to resolve its "structural defects" which have until now prevented it from being an effective supervisor, he added.

Merkel's government wants the ECB's new powers to apply only to systemically relevant or cross-border institutions - a position that got clear backing from lawmakers in her centre-right coalition this week.

She and French President Francois Hollande are due to discuss banking supervision on Saturday.   Continued...